**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**_________________**

**Form      10-Q**

**          QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) **

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**For      the quarterly period ended December 31, 2006**

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

**              OF      THE SECURITIES EXCHANGE ACT OF 1934**

**Commission      file number: 000-25391**

**Capitol      Federal Financial**

*(*
*Exact      name of registrant as specified in its charter)*

**                             United      States**
**48-1212142**

*                                                 (State      or other      jurisdiction of      incorporation                                                           (I.R.S.      Employer*

*                                                or      organization)                                                                                          Identification No.)*

**                                               700      Kansas Avenue,      Topeka,      Kansas                                                                             66603**

*                                              *
*(Address      of principal executive      offices)                                                                        (Zip      Code)*

**Registrant’s      telephone number, including area code:**

**(785)      235-1341**

----

|  PART                I -- FINANCIAL INFORMATION                                                                                                                                               | PageNumber |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Item                1.  Financial Statements (Unaudited):                                                                                                                                |       |
|              Consolidated                Balance Sheets                at                December 31, 2006 and September 30, 2006 | 3          |
|              Consolidated                Statements of Income                for the three months ended                           |       |
|                   December                31, 2006 and December 31, 2005                                 | 4          |
|              Consolidated                Statement of Stockholders’ Equity                for the three months ended        |       |
|                   December                31, 2006                                                       | 5          |
|              Consolidated                Statements of Cash Flows                for the three months ended                       |       |
|                   December                31, 2006 and December 31, 2005                                 | 6          |
|              Notes                to Consolidated Interim Financial Statements                                                    | 8          |
| Item                2.  Management’s                Discussion and Analysis                of                Financial Condition and                                               |       |
|                   Results                of Operations                                                   | 9          |
| Item                3.  Quantitative                and Qualitative Disclosure about Market Risk                                                                                         | 34         |
| Item                4.  Controls                and Procedures                                                                                                                           | 43         |
|                                                                                                                                                                                               |       |
| PART                II -- OTHER INFORMATION                                                                                                                                                        |       |
| Item                1.   Legal                Proceedings                                                                                                                                | 43         |
| Item                1A. Risk                Factors                                                                                                                                                | 43         |
| Item                2.   Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                      | 44         |
| Item                3.   Defaults                Upon Senior Securities                                                                                                                  | 44         |
| Item                4.   Submission                of Matters to a Vote of Security Holders                                                                                              | 45         |
| Item                5.   Other                Information                                                                                                                                | 45         |
| Item                6.   Exhibits                                                                                                                                                        | 45         |
|                                                                                                                                                                                               |       |
| Signature                Page                                                                                                                                                                      | 46         |
|                                                                                                                                                                                               |       |
| INDEX                TO EXHIBITS                                                                                                                                                                   | 47         |
|                                                                                                                                                                                               |       |

----

**PART      I -- FINANCIAL INFORMATION**

**Item      1. Financial Statements**

CONSOLIDATED      BALANCE SHEETS      

|                                                                                                                                   |   | December                31, |       | September                30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|------------------------------|--------|
|                                                                                                                                   |   | 2006                        |       | 2006                         |   |
| ASSETS:                                                                                                                                |   |                        | (Unaudited | )                            |   |   |   |
| Cash                and cash equivalents                                                                                               |   | $                           | 187,479    |                         | $      | 183,242 |   |
| Investment                securities:                                                                                                  |   |                        |       |                         |   |   |   |
|         Available-for-sale,                at market (amortized cost of $145,927 and $189,275) |   |                        | 145,984    |                         |   | 189,480 |   |
|         Held-to-maturity,                at cost (market value of $692,115 and $233,525)       |   |                        | 698,530    |                         |   | 240,000 |   |
| Mortgage-related                securities:                                                                                            |   |                        |       |                         |   |   |   |
|         Trading,                at market                                                      |   |                        | --         |                         |   | 396,904 |   |
|         Available-for-sale,                at market (amortized cost of $486,541 and $558,939) |   |                        | 485,748    |                         |   | 556,248 |   |
|         Held-to-maturity,                at cost (market value of $1,157,631 and $1,101,159)   |   |                        | 1,182,800  |                         |   | 1,131,634 |   |
| Loans                receivable held-for-sale, net                                                                                     |   |                        | 1,420      |                         |   | 1,440 |   |
| Loans                receivable, net                                                                                                   |   |                        | 5,229,032  |                         |   | 5,221,117 |   |
| Mortgage                servicing rights ("MSR"), net                                                                                  |   |                        | 6,508      |                         |   | 6,917 |   |
| Capital                stock of Federal Home Loan Bank ("FHLB"), at cost                                                               |   |                        | 167,829    |                         |   | 165,130 |   |
| Accrued                interest receivable                                                                                             |   |                        | 35,848     |                         |   | 38,032 |   |
| Premises                and equipment, net                                                                                             |   |                        | 27,620     |                         |   | 26,500 |   |
| Real                estate owned, net                                                                                                  |   |                        | 1,770      |                         |   | 2,409 |   |
| Income                taxes receivable, net                                                                                            |   |                        | 4,857      |                         |   | 5,359 |   |
| Deferred                income taxes, net                                                                                              |   |                        | 14,955     |                         |   | 20,967 |   |
| Other                assets                                                                                                            |   |                        | 15,453     |                         |   | 13,694 |   |
|         TOTAL                ASSETS                                                            |   | $                           | 8,205,833  |                         | $      | 8,199,073 |   |
|                                                                                                                                   |   |                        |       |                         |   |   |   |
| LIABILITIES:                                                                                                                           |   |                        |            |                         |   |   |   |
| Deposits                                                                                                                               |   | $                           | 3,934,707  |                         | $      | 3,900,431 |   |
| Advances                from FHLB                                                                                                      |   |                        | 3,270,125  |                         |   | 3,268,705 |   |
| Other                borrowings, net                                                                                                   |   |                        | 53,481     |                         |   | 53,467 |   |
| Advance                payments by borrowers for taxes and insurance                                                                   |   |                        | 15,826     |                         |   | 48,353 |   |
| Accounts                payable and accrued expenses                                                                                   |   |                        | 64,555     |                         |   | 64,898 |   |
|         Total                liabilities                                                       |   |                        | 7,338,694  |                         |   | 7,335,854 |   |
|                                                                                                                                   |   |                        |       |                         |   |   |   |
| STOCKHOLDERS'                EQUITY:                                                                                                   |   |                        |       |                         |   |   |   |
| Preferred                stock ($0.01 par value) 50,000,000 shares authorized; none                issued                              |   |                        | --         |                         |   | -- |   |
| Common                stock ($0.01 par value) 450,000,000 shares authorized; 91,512,287                                                |   |                        |       |                         |   |   |   |
|         shares                issued as of December 31, 2006 and September 30, 2006            |   |                        | 915        |                         |   | 915 |   |
| Additional                paid-in capital                                                                                              |   |                        | 431,931    |                         |   | 429,286 |   |
| Unearned                compensation, Employee Stock Ownership Plan ("ESOP")                                                           |   |                        | (13,611    | )                            |   | (14,784 | ) |
| Unearned                compensation, Recognition and Retention Plan ("RRP")                                                           |   |                        | (737       | )                            |   | (825 | ) |
| Retained                earnings                                                                                                       |   |                        | 759,086    |                         |   | 760,890 |   |
| Accumulated                other comprehensive loss                                                                                    |   |                        | (457       | )                            |   | (1,543 | ) |
| Less                shares held in treasury (17,396,732 and 17,480,537 shares as                of                                     |   |                        |       |                         |   |   |   |
|        December                31, 2006 and September 30, 2006, at cost)                            |   |                        | (309,988   | )                            |   | (310,720 | ) |
|            Total                stockholders' equity                            |   |                        | 867,139    |                         |   | 863,219 |   |
|                                                                                                                                   |   |                        |       |                         |   |   |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY                                                                              |   | $                           | 8,205,833  |                         | $      | 8,199,073 |   |

<Index>

----

CAPITOL      FEDERAL FINANCIAL AND SUBSIDIARY

|                                                                            |   | For                the Three Months Ended |    |
|---------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                            |   | December                31,               |    |
|                                                                            |   | 2006                                      |    | 2005 |   |
| INTEREST                AND DIVIDEND INCOME:                                    |   |                                      |    |   |   |   |   |
| Loans                receivable                                                 |   | $                                         | 73,192  |   | $ | 75,160 |   |
| Mortgage-related                securities                                      |   |                                      | 19,521  |   |   | 19,344 |   |
| Investment                securities                                            |   |                                      | 6,684   |   |   | 4,894 |   |
| Cash                and cash equivalents                                        |   |                                      | 3,070   |   |   | 79 |   |
| Capital                stock of FHLB                                            |   |                                      | 2,699   |   |   | 2,383 |   |
|      Total                interest and dividend income |   |                                      | 105,166 |   |   | 101,860 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| INTEREST                EXPENSE:                                                |   |                                      |    |   |   |   |   |
| Deposits                                                                        |   |                                      | 35,469  |   |   | 27,245 |   |
| FHLB                advances                                                    |   |                                      | 40,741  |   |   | 39,804 |   |
| Other                borrowings                                                 |   |                                      | 1,129   |   |   | 955 |   |
|      Total                interest expense             |   |                                      | 77,339  |   |   | 68,004 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| NET                INTEREST AND DIVIDEND INCOME                                 |   |                                      | 27,827  |   |   | 33,856 |   |
| (RECOVERY)PROVISION                FOR LOAN LOSSES                              |   |                                      | (280    | ) |   | 268 |   |
|     NET                INTEREST AND DIVIDEND INCOME AFTER   |   |                                      |    |   |   |   |   |
|                  (RECOVERY)PROVISION FOR LOAN LOSSES                       |   |                                      | 28,107  |   |   | 33,588 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| OTHER                INCOME:                                                    |   |                                      |    |   |   |   |   |
| Retail                fees and charges                                          |   |                                      | 4,288   |   |   | 4,349 |   |
| Loan                fees                                                        |   |                                      | 661     |   |   | 475 |   |
| Insurance                commissions                                            |   |                                      | 441     |   |   | 424 |   |
| Gain                on trading securities, net                                  |   |                                      | 34      |   |   | -- |   |
| Loss                on available-for-sale securities, net                       |   |                                      | (47     | ) |   | -- |   |
| Other,                net                                                       |   |                                      | 838     |   |   | 594 |   |
|      Total                other income                 |   |                                      | 6,215   |   |   | 5,842 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| OTHER                EXPENSES:                                                  |   |                                      |    |   |   |   |   |
| Salaries                and employee benefits                                   |   |                                      | 10,121  |   |   | 9,935 |   |
| Occupancy                of premises                                            |   |                                      | 2,870   |   |   | 3,098 |   |
| Regulatory                and outside services                                  |   |                                      | 1,643   |   |   | 1,199 |   |
| Deposit                and loan transaction costs                               |   |                                      | 1,050   |   |   | 1,109 |   |
| Advertising                                                                     |   |                                      | 889     |   |   | 697 |   |
| Other,                net                                                       |   |                                      | 1,058   |   |   | 1,554 |   |
|      Total                other expenses               |   |                                      | 17,631  |   |   | 17,592 |   |
| INCOME                BEFORE INCOME TAX EXPENSE                                 |   |                                      | 16,691  |   |   | 21,838 |   |
| INCOME                TAX EXPENSE                                               |   |                                      | 6,440   |   |   | 8,525 |   |
| NET                INCOME                                                       |   | $                                         | 10,251  |   | $ | 13,313 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| Basic                earnings per common share                                  |   | $                                         | 0.14    |   | $ | 0.18 |   |
| Diluted                earnings per common share                                |   | $                                         | 0.14    |   | $ | 0.18 |   |
| Dividends                declared per share                                     |   | $                                         | 0.59    |   | $ | 0.80 |   |
|                                                                            |   |                                      |    |   |   |   |   |
| Weighted                average number of common shares outstanding:            |   |                                      |    |
|      Basic                                             |   |                                      | 72,627  |   |   | 72,650 |   |
|      Diluted                                           |   |                                      | 72,835  |   |   | 72,972 |   |

----

CAPITOL      FEDERAL FINANCIAL AND SUBSIDIARY

|                                                                               |   |   |   |       |   |         |   |         |    |     |   | Accumulated   |   |     |    |   |   |
|------------------------------------------------------------------------------------|--------|--------|--------|------------|--------|--------------|--------|--------------|---------|----------|--------|---------------|--------|----------|---------|--------|--------|
|                                                                               |   |   |   | Additional |   | Unearned     |   | Unearned     |    |     |   | Other         |   |     |    |   |   |
|                                                                               |   | Common |   | Paid-In    |   | Compensation |   | Compensation |    | Retained |   | Comprehensive |   | Treasury |    |   |   |
|                                                                               |   | Stock  |   | Capital    |   | (ESOP)       |   | (RRP)        |    | Earnings |   | Loss          |   | Stock    |    | Total  |   |
|                                                                               |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |
| Balance                at October 1, 2006                                          |   | $      | 915    |       | $      | 429,286      |   | $            | (14,784 | )        | $      | (825          | )      | $        | 760,890 |   | $      | (1,543 | ) | $ | (310,720 | ) | $ | 863,219 |   |
| Comprehensive                income:                                               |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
|    Net                income                                        |   |   |   |       |   |         |   |         |    |     |   |          |   |     | 10,251  |   |   |   |   |   |   |   |   | 10,251 |   |
|    Changes                in unrealized losses on                   |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
|     available-for-sale                securities, net of       |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
|     deferred income                taxes of $664 thousand |   |   |   |       |   |         |   |         |    |     |   |          |   | 1,086    |    |   |   |   |   | 1,086 |   |
| Total                comprehensive income                                          |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   | 11,337 |   |
|                                                                               |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
| Tax                benefit of market value change in vested                        |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
|   RRP                shares                                              |   |   |   |       |   | 8            |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   | 8 |   |
| Common                stock committed to be released for                           |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
|   allocation                - ESOP                                       |   |   |   |       |   | 1,388        |   |         | 504     |     |   |          |   |     |    |   |   |   |   |   |   |   |   | 1,892 |   |
| Acquisition                of treasury stock                                       |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   | (41 | ) |   | (41 | ) |
| Stock                options exercised                                             |   |   |   |       |   | 1,191        |   |         |    |     |   |          |   |     |    |   |   |   |   |   | 777 |   |   | 1,968 |   |
| Treasury                stock activity related to RRP, net                         |   |   |   |       |   | (10          | )      |         |    |     |   | 4             |   |     |    |   |   |   |   |   | (4 | ) |   | (10 | ) |
| Amortization                of unearned compensation - RRP                         |   |   |   |       |   |         |   |         |    |     |   | 84            |   |     |    |   |   |   |   |   |   |   |   | 84 |   |
| Stock                based compensation expense                                    |   |   |   |       |   | 68           |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   | 68 |   |
| Dividends                in excess of debt service cost - ESOP                     |   |   |   |       |   |         |   |         | 669     |     |   |          |   |     |    |   |   |   |   |   |   |   |   | 669 |   |
| Dividends                on common stock to stockholders                           |   |   |   |       |   |         |   |         |    |     |   |          |   |     |    |   |   |   |   |   |   |   |   |   |   |
| ($.59                per public share)                                             |   |   |   |       |   |         |   |         |    |     |   |          |   |     | (12,055 | )      |   |   |   |   |   |   |   | (12,055 | ) |
| Balance                at December 31, 2006                                        |   | $      | 915    |       | $      | 431,931      |   | $            | (13,611 | )        | $      | (737          | )      | $        | 759,086 |   | $      | (457 | ) | $ | (309,988 | ) | $ | 867,139 |   |

<Index>

----

CONSOLIDATED      STATEMENTS OF CASH FLOWS

|                                                    (Dollars                in thousands) |   | For                the Three Months Ended |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                    |   | December                31,               |     |
|                                                                                                                                                                                                                                                                                                                                                    |   | 2006                                      |     | 2005 |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                                                                                                                                                                                                                                                                    |   |                                      |     |   |   |
| Net                income                                                                                                                                                                                                                                                                                                                               |   | $                                         | 10,251   |   | $ | 13,313 |   |
| Adjustments                to reconcile net income to net cash provided by                                                                                                                                                                                                                                                                              |   |                                      |     |   |   |   |   |
|   operating                activities:                                                                                                                                                                                                                                                                                                        |   |                                      |     |   |   |   |   |
|   FHLB                stock dividends                                                                                                                                                                                                                                                                                                         |   |                                      | (2,699   | ) |   | (2,383 | ) |
|   Net                loan origination fees capitalized                                                                                                                                                                                                                                                                                        |   |                                      | 468      |   |   | 207 |   |
|   Amortization                of net deferred loan origination fees                                                                                                                                                                                                                                                                           |   |                                      | (348     | ) |   | (332 | ) |
|   (Recovery)                provision for loan losses                                                                                                                                                                                                                                                                                         |   |                                      | (280     | ) |   | 268 |   |
|   Losses                (gains) on sale of premises and equipment, net                                                                                                                                                                                                                                                                        |   |                                      | 3        |   |   | (5 | ) |
|   Gains                on sale of real estate owned, net                                                                                                                                                                                                                                                                                      |   |                                      | (134     | ) |   | (55 | ) |
|   Gains                on sale of loans receivable held-for-sale                                                                                                                                                                                                                                                                              |   |                                      | (5       | ) |   | (4 | ) |
|   Gains                on trading securities, net                                                                                                                                                                                                                                                                                             |   |                                      | (34      | ) |   | -- |   |
|   Loss                on available-for-sale securities, net                                                                                                                                                                                                                                                                                   |   |                                      | 47       |   |   | -- |   |
|   Originations                of loans receivable held-for-sale                                                                                                                                                                                                                                                                               |   |                                      | (252     | ) |   | (385 | ) |
|   Proceeds                from sale of loans receivable held-for-sale                                                                                                                                                                                                                                                                         |   |                                      | 277      |   |   | 424 |   |
|   Amortization                of MSR                                                                                                                                                                                                                                                                                                          |   |                                      | 294      |   |   | -- |   |
|   Impairment                of MSR                                                                                                                                                                                                                                                                                                            |   |                                      | 115      |   |   | -- |   |
|   Amortization                and accretion of premiums and discounts on                                                                                                                                                                                                                                                                      |   |                                      |     |   |   |   |   |
|           mortgage-related                and investment securities                                                                                                                                                                                                                                   |   |                                      | 33       |   |   | 2,421 |   |
| Principal                collected on trading securities                                                                                                                                                                                                                                                                                                |   |                                      | 7,729    |   |   | -- |   |
| Proceeds                from sale of trading securities                                                                                                                                                                                                                                                                                                 |   |                                      | 389,209  |   |   | -- |   |
|   Depreciation                and amortization of premises and equipment                                                                                                                                                                                                                                                                      |   |                                      | 747      |   |   | 852 |   |
|   Amortization                of deferred debt issuance costs                                                                                                                                                                                                                                                                                 |   |                                      | 14       |   |   | 14 |   |
|   Common                stock committed to be released for allocation - ESOP                                                                                                                                                                                                                                                                  |   |                                      | 1,892    |   |   | 1,709 |   |
|   RRP                shares sold, net of forfeitures                                                                                                                                                                                                                                                                                          |   |                                      | (10      | ) |   | -- |   |
|   Stock                based compensation - stock options and RRP                                                                                                                                                                                                                                                                             |   |                                      | 152      |   |   | 137 |   |
|   Changes                in:                                                                                                                                                                                                                                                                                                                  |   |                                      |     |   |   |   |   |
|           Accrued                interest receivable                                                                                                                                                                                                                                                  |   |                                      | 2,184    |   |   | 2,839 |   |
|           Other                assets                                                                                                                                                                                                                                                                 |   |                                      | (2,089   | ) |   | 1,491 |   |
|           Income                taxes payable/receivable and deferred income taxes                                                                                                                                                                                                                    |   |                                      | 5,858    |   |   | 8,058 |   |
|           Accounts                payable and accrued expenses                                                                                                                                                                                                                                        |   |                                      | 1,407    |   |   | 833 |   |
|              Net                cash provided by operating activities                                                                                                                                                                                                                  |   |                                      | 414,829  |   |   | 29,402 |   |
|                                                                                                                                                                                                                                                                                                                                                    |   |                                      |     |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                                                                                                                                                                                                                                                                    |   |                                      |     |   |   |   |   |
| Proceeds                from maturities or calls of investment securities AFS                                                                                                                                                                                                                                                                           |   |                                      | 45,000   |   |   | -- |   |
| Purchases                of investment securities AFS                                                                                                                                                                                                                                                                                                   |   |                                      | (1,520   | ) |   | -- |   |
| Proceeds                from maturities or calls of investment securities HTM                                                                                                                                                                                                                                                                           |   |                                      | 12,000   |   |   | -- |   |
| Purchases                of investment securities HTM                                                                                                                                                                                                                                                                                                   |   |                                      | (469,620 | ) |   | -- |   |
| Principal                collected on mortgage-related securities AFS                                                                                                                                                                                                                                                                                   |   |                                      | 56,298   |   |   | 91,670 |   |
| Proceeds                from sale of mortgage-related securities AFS                                                                                                                                                                                                                                                                                    |   |                                      | 15,237   |   |   | -- |   |
| Principal                collected on mortgage-related securities HTM                                                                                                                                                                                                                                                                                   |   |                                      | 56,710   |   |   | 84,064 |   |
| Purchases                of mortgage-related securities HTM                                                                                                                                                                                                                                                                                             |   |                                      | (108,135 | ) |   | -- |   |
| Loan                originations, net of principal collected                                                                                                                                                                                                                                                                                            |   |                                      | (26,578  | ) |   | (16,905 | ) |
| Loan                purchases, net of principal collected                                                                                                                                                                                                                                                                                               |   |                                      | 18,173   |   |   | (84,767 | ) |
| Purchases                of premises and equipment, net                                                                                                                                                                                                                                                                                                 |   |                                      | (1,870   | ) |   | (2,449 | ) |
| Proceeds                from sales of real estate owned                                                                                                                                                                                                                                                                                                 |   |                                      | 1,423    |   |   | 612 |   |
|              Net                cash (used in) provided by investing activities                                                                                                                                                                                                        |   |                                      | (402,882 | ) |   | 72,225 |   |

----

| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                                               |   |   |    |   |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
| Dividends                paid                                                                                                      |   |   | (12,055 | )      |   | (16,387 | ) |
| Dividends                in excess of debt service cost of ESOP, net                                                               |   |   | 669     |   |   | (79 | ) |
| Deposits,                net of withdrawals                                                                                        |   |   | 34,276  |   |   | (23,060 | ) |
| Proceeds                from advances/line of credit from FHLB                                                                     |   |   | --      |   |   | 439,300 |   |
| Repayments                on advances/line of credit from FHLB                                                                     |   |   | --      |   |   | (475,700 | ) |
| Change                in advance payments by borrowers for taxes                and insurance                                 |   |   | (32,527 | )      |   | (31,111 | ) |
| Acquisitions                of treasury stock                                                                                      |   |   | (41     | )      |   | (1,844 | ) |
| Stock                options exercised                                                                                             |   |   | 1,387   |   |   | 21 |   |
| Excess                tax benefits from stock options                                                                              |   |   | 581     |   |   | -- |   |
|              Net                cash used in financing activities |   |   | (7,710  | )      |   | (108,860 | ) |
|                                                                                                                               |   |   |    |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                |   |   | 4,237   |   |   | (7,233 | ) |
| CASH                AND CASH EQUIVALENTS:                                                                                          |   |   |    |   |   |   |   |
| Beginning                of period                                                                                                 |   |   | 183,242 |   |   | 58,566 |   |
| End                of period                                                                                                       |   | $      | 187,479 |   | $      | 51,333 |   |
|                                                                                                                               |   |   |    |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURES OF CASH FLOW INFORMATION:                                                                  |   |   |    |   |   |   |   |
|       Income                tax payments                                                             |   | $      | --      |   | $      | 465 |   |
|       Interest                payments, net of interest credited to deposits                         |   | $      | 44,009  |   | $      | 42,653 |   |
|                                                                                                                               |   |   |    |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURE OF NON-CASH INVESTING AND                                                                   |   |   |    |   |   |   |   |
|                       FINANCING ACTIVITIES:                                                          |   |   |    |   |   |   |   |
|       Loans                transferred to real estate owned                                          |   | $      | 650     |   | $      | 582 |   |
|                                                                                                                               |   |   |    |   |   |   |   |
|       Market                value change related to fair value hedge:                                |   |   |    |   |   |   |   |
|             Interest                rate swaps hedging FHLB advances   |   | $      | (1,420  | )      | $      | 4,563 |   |

<Index>

----

**Notes      to Consolidated Interim Financial Statements      (Unaudited)**

**1.   Basis      of Financial Statement Presentation**

**2.   Earnings      Per Share**

For      the      quarter ended December 31, 2006, basic and diluted earnings per share were      $0.14. The Company accounts for the 3,024,574 shares acquired by its ESOP in      accordance with Statement of Position (“SOP”) 93-6 and the shares acquired for      its RRP in a manner similar to the ESOP shares; shares acquired by the ESOP      and      the RRP are not considered in the basic average shares outstanding until the      shares are committed for allocation or vested to an employee’s individual      account. The following is a reconciliation of the numerators and denominators      of      the basic and diluted earnings per share calculations. 

|                                                                        |   | For                the Three Months Ended                                                                                                                                                                              |       |
|-----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                        |   | December                31,                                                                                                                                                                                            |       |
|                                                                        |   |                                  2006   |       |                          2005                 (1)  |   |
| (Dollars                in thousands, except per share amounts)   |   |
|                                                                        |   |                                                                                                                                                                                                                   |       |   |   |
| Net                income                                                   |   | $                                                                                                                                                                                                                      | 10,251     |   | $ | 13,313 |   |
|                                                                        |   |                                                                                                                                                                                                                   |       |   |   |   |   |
| Average                common shares outstanding                            |   |                                                                                                                                                                                                                   | 72,626,122 |   |   | 72,649,222 |   |
| Average                committed ESOP shares outstanding                    |   |                                                                                                                                                                                                                   | 548        |   |   | 548 |   |
| Total                basic average common shares outstanding                |   |                                                                                                                                                                                                                   | 72,626,670 |   |   | 72,649,770 |   |
|                                                                        |   |                                                                                                                                                                                                                   |       |   |   |   |   |
| Effect                of dilutive RRP shares                                |   |                                                                                                                                                                                                                   | 7,869      |   |   | 3,496 |   |
| Effect                of dilutive stock options                        |   |                                                                                                                                                                                                                   | 200,480    |   |   | 318,278 |   |
| Total                diluted average common shares outstanding         |   |                                                                                                                                                                                                                   | 72,835,019 |   |   | 72,971,544 |   |
|                                                                        |   |                                                                                                                                                                                                                   |       |   |   |   |   |
| Net                earnings per share:                                      |   |                                                                                                                                                                                                                   |       |   |   |   |   |
|      Basic                                         |   | $                                                                                                                                                                                                                      | 0.14       |   | $ | 0.18 |   |
|      Diluted                                       |   | $                                                                                                                                                                                                                      | 0.14       |   | $ | 0.18 |   |

----

**3.**
**   **
**Recent      Accounting Pronouncements**

**Item      2.   Management’s Discussion and Analysis of Financial Condition      and Results of Operations**

| ·   | 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                area; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                ability to acquire funds from or invest funds in wholesale or secondary                markets; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | the                future earnings and capital levels of the Bank, which could affect                the                ability of the Company to pay dividends in accordance with its dividend                policies; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                credit risks of lending and investing activities, including changes                in the                level and direction of loan delinquencies and write-offs and changes                in                estimates of the adequacy of the allowance for loan                losses; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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, monetary and fiscal policies and                laws,                including interest rate policies of the Board of Governors of the                Federal                Reserve System; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                effects of, and changes in, foreign and military policies of the                United                States Government; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | inflation,                interest rate, market and monetary fluctuations; |
|--------------------|----------------------------------------------------------------------------|

| ·   | our                ability to access cost-effective                funding; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | the                timely development of 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,                when                required; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                impact of changes in financial services laws and regulations, including                laws concerning taxes, banking, securities and                insurance; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | technological                changes; |
|--------------------|---------------------------------------|

| ·   | acquisitions                and dispositions; |
|--------------------|-----------------------------------------------|

| ·   | changes                in consumer spending and saving habits;                and |
|--------------------|-----------------------------------------------------------------------------------|

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

----

**Executive      Summary**

----

**Available      Information**

**Critical      Accounting Policies**

----

**Allowance      for Loan Losses.**

----

**Securities      Impairment.**

**Valuation      of Mortgage Servicing Rights.**

**Valuation      of Deferred Income Tax Assets.**

**Derivative      Instruments.**

**Financial      Condition**

----

|                                                   |   | Balance                at                                       |       |
|--------------------------------------------------------|--------|-----------------------------------------------------------------|------------|
|                                                   |   | December                31,                 |       | September                30, |   | June                30, |   |    December                31, |   |
|                                                   |   | 2006                                                            |       | 2006 |   | 2006 |   | 2005 |   |
|                                                   |   | (Dollars                in thousands, except per share amounts) |       |
| Selected                Balance Sheet Data:            |   |                                                            |       |   |   |   |   |   |   |
| Total                assets                            |   | $                                                               | 8,205,833  |   | $ | 8,199,073 |   | $ | 8,117,173 |   | $ | 8,318,836 |   |
| Cash                and cash equivalents               |   |                                                            | 187,479    |   |   | 183,242 |   |   | 105,162 |   |   | 51,333 |   |
| Investment                securities                   |   |                                                            | 844,514    |   |   | 429,480 |   |   | 382,128 |   |   | 430,517 |   |
| Mortgage-related                securities             |   |                                                            | 1,668,548  |   |   | 2,084,786 |   |   | 1,788,858 |   |   | 1,967,564 |   |
| Loans                receivable, net                   |   |                                                            | 5,229,032  |   |   | 5,221,117 |   |   | 5,564,502 |   |   | 5,565,077 |   |
| Mortgage                servicing rights               |   |                                                            | 6,508      |   |   | 6,917 |   |   | 2,487 |   |   | 2,677 |   |
| Capital                stock of FHLB                   |   |                                                            | 167,829    |   |   | 165,130 |   |   | 167,556 |   |   | 184,642 |   |
| Deposits                                               |   |                                                            | 3,934,707  |   |   | 3,900,431 |   |   | 3,895,869 |   |   | 3,937,237 |   |
| Advances                from FHLB                      |   |                                                            | 3,270,125  |   |   | 3,268,705 |   |   | 3,207,865 |   |   | 3,385,502 |   |
| Other                borrowings                        |   |                                                            | 53,481     |   |   | 53,467 |   |   | 53,453 |   |   | 53,424 |   |
| Stockholders'                equity                    |   |                                                            | 867,139    |   |   | 863,219 |   |   | 860,032 |   |   | 862,238 |   |
| Accumulated                other comprehensive loss    |   |                                                            | (457       | ) |   | (1,543 | ) |   | (4,359 | ) |   | (3,470 | ) |
| Equity                to total assets at end of period |   |                                                            | 10.57      | % |   | 10.53 | % |   | 10.60 | % |   | 10.36 | % |
| Book                value per share                    |   | $                                                               | 11.92      |   | $ | 11.89 |   | $ | 11.85 |   | $ | 11.87 |   |
| Shares                outstanding                      |   |                                                            | 72,725,595 |   |   | 72,589,660 |   |   | 72,565,520 |   |   | 72,653,502 |   |

The      following table presents rate information at the dates      indicated.

|                                                               |                                       | December                31, |   | September                30, |   | June                30, |   |   | December                31, |
|--------------------------------------------------------------------|--------------------------------------------|-----------------------------|--------|------------------------------|--------|-------------------------|--------|--------|-----------------------------|
|                                                               |                                       | 2006                        |   | 2006                         |   | 2006                    |   |   | 2005                        |
| Average                Yield / Cost at End of Period: (annualized) |                                       |                        |   |                         |   |                    |   |   |                        |   |   |
|                                                               | Loans                receivable            | 5.66                        | %      |                         | 5.64   | %                       |   | 5.59   | %                           |   |   | 5.51 | % |
|                                                               | Mortgage-related                securities | 4.26                        |   |                         | 4.54   |                    |   | 4.14   |                        |   |   | 3.84 |   |
|                                                               | Investment                securities       | 4.82                        |   |                         | 4.46   |                    |   | 4.35   |                        |   |   | 4.54 |   |
|                                                               | Deposits                                   | 3.68                        |   |                         | 3.61   |                    |   | 3.40   |                        |   |   | 2.86 |   |
|                                                               | FHLB                advances               | 4.88                        |   |                         | 4.88   |                    |   | 4.82   |                        |   |   | 4.59 |   |
|                                                               | Borrowings,                other           | 8.14                        |   |                         | 8.28   |                    |   | 7.84   |                        |   |   | 6.92 |   |

----

**Loans      Receivable.**

|                             |                                                | For                the Three Months Ended |   |
|----------------------------------|-----------------------------------------------------|-------------------------------------------|--------|
|                             |                                                | December                31, 2006          |   | September                30, 2006 |   | June                30, 2006 |   | March                31, 2006 |   |
|                             |                                                | Amount                                    | Rate   |   |   | Amount | Rate |   |   | Amount | Rate |   |   | Amount | Rate |   |   |
| Loans                receivable: | (Dollars                in thousands)               |
|                             | Beginning                balance                    |  $ 5,257,473               | 5.55   | % |   |  $ 5,601,211  | 5.51 | % |   |  $ 5,554,691  | 5.45 | % |   |  $ 5,600,378  | 5.41 | % |   |
|                             | Originations                and refinances          | 169,473                              | 6.39   |   |   | 215,763  | 6.63 |   |   | 249,077  | 6.46 |   |   | 150,741  | 6.34 |   |   |
|                             | Purchases                                           | 26,372                               | 5.98   |   |   | 85,295  | 6.08 |   |   | 40,115  | 5.99 |   |   | 53,917  | 5.51 |   |   |
|                             | Repayments                                          | (193,991)                                 |   |   |   | (240,209) |   |   |   | (242,449) |   |   |   | (249,837) |   |   |   |
|                             | Principal                balance of loans           |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   exchanged                for securities | --                                        | --     |   |   | (404,819) | 5.72 |   |   | -- | -- |   |   | -- | -- |   |   |
|                             | Other                                               | 530                                  |   |   |   | 232  |   |   |   | (223) |   |   |   | (508) |   |   |   |
|                             | Ending                balance                       |  $ 5,259,857               | 5.57   | % |   |  $ 5,257,473  | 5.55 | % |   |  $ 5,601,211  | 5.51 | % |   |  $ 5,554,691  | 5.45 | % |   |

----

|                                                                                                   |   | December                31, 2006      |      |  September                30, 2006 |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|
|                                                                                                   |   | Amount                                |      | Average                Rate             |   |  %                of Total |   |  Amount |   | Average                Rate |   |  %                of Total |   |
|                                                                                                   |   | (Dollars                in thousands) |      |
| Real                Estate Loans:                                                                      |   |                                  |      |                                    |   |    |   |    |   |   |   |    |   |
|      One-                to four-family                                       |   | $                                     | 4,940,363 |                                    |   | 5.44 | % |   | 93.93 | % | $ | 4,931,505 |   |   | 5.41 | % |   | 93.80 | % |
|      Multi-family                                                             |   |                                  | 48,663    |                                    |   | 6.50 |   |   | 0.93 |   |   | 48,331 |   |   | 6.50 |   |   | 0.92 |   |
|      Commercial                                                               |   |                                  | 10,130    |                                    |   | 6.43 |   |   | 0.19 |   |   | 8,443 |   |   | 6.36 |   |   | 0.16 |   |
|      Construction                and development                              |   |                                  | 37,168    |                                    |   | 5.94 |   |   | 0.70 |   |   | 45,452 |   |   | 5.81 |   |   | 0.87 |   |
|           Total                real estate loans     |   |                                  | 5,036,324 |                                    |   | 5.45 |   |   | 95.75 |   |   | 5,033,731 |   |   | 5.43 |   |   | 95.75 |   |
|                                                                                                   |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer                Loans:                                                                         |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Savings                loans                                             |   |                                  | 6,161     |                                    |   | 6.27 |   |   | 0.12 |   |   | 6,250 |   |   | 6.12 |   |   | 0.12 |   |
|      Automobile                                                               |   |                                  | 4,114     |                                    |   | 6.87 |   |   | 0.08 |   |   | 3,660 |   |   | 6.88 |   |   | 0.07 |   |
|      Home                equity                                               |   |                                  | 209,384   |                                    |   | 8.40 |   |   | 3.98 |   |   | 210,008 |   |   | 8.40 |   |   | 3.99 |   |
|      Other                                                                    |   |                                  | 3,874     |                                    |   | 8.26 |   |   | 0.07 |   |   | 3,824 |   |   | 8.27 |   |   | 0.07 |   |
|           Total                consumer loans        |   |                                  | 223,533   |                                    |   | 8.31 |   |   | 4.25 |   |   | 223,742 |   |   | 8.31 |   |   | 4.25 |   |
| Total                loans receivable                                                                  |   |                                  | 5,259,857 |                                    |   | 5.57 | % |   | 100.00 | % |   | 5,257,473 |   |   | 5.55 | % |   | 100.00 | % |
|                                                                                                   |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                  |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Loans                in process                                                |   |                                  | 17,244    |                                    |   |   |   |   |   |   |   | 22,605 |   |   |   |   |   |   |   |
|     Unearned                fees and deferred costs                                |   |                                  | 9,438     |                                    |   |   |   |   |   |   |   | 9,318 |   |   |   |   |   |   |   |
|     Allowance                for losses                                            |   |                                  | 4,143     |                                    |   |   |   |   |   |   |   | 4,433 |   |   |   |   |   |   |   |
|           Total                loans receivable, net |   | $                                     | 5,229,032 |                                    |   |   |   |   |   |   | $ | 5,221,117 |   |   |   |   |   |   |   |
|                                                                                                   |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                information:                                                                      |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                serviced for others                                                               |   | $                                     | 750,528   |                                    |   |   |   |   |   |   | $ | 776,094 |   |   |   |   |   |   |   |

----

**Asset      Quality**

|                                                 |   | December                31,           |   |  September                30, |   |  December                31, |   |
|------------------------------------------------------|--------|---------------------------------------|--------|------------------------------------|--------|-----------------------------------|--------|
|                                                 |   | 2006                                  |   |  2006                         |   |  2005                        |   |
| Asset                quality information:            |   | (Dollars                in thousands) |   |
| Loans                30-89 days delinquent           |   | $                                     | 24,716 |                               | $      | 20,478                            |   | $ | 27,690 |   |
| Non-performing                loans                  |   |                                  | 6,681  |                               |   | 5,609                             |   |   | 9,558 |   |
| Real                estate owned                     |   |                                  | 1,770  |                               |   | 2,401                             |   |   | 1,678 |   |
| Asset                quality ratios:                 |   |                                  |   |                               |   |                              |   |   |   |   |
| Non-performing                assets to total assets |   |                                  | 0.10   | %                                  |   | 0.10                              | %      |   | 0.14 | % |
| Non-performing                loans to total loans   |   |                                  | 0.13   | %                                  |   | 0.11                              | %      |   | 0.17 | % |

----

|                                                               |   | For                the Three Months Ended |   |
|--------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                               |   | December                31,               |   |
|                                                               |   | 2006                                      |   | 2005 |   |
| Allowance                for loan losses:                          |   | (Dollars                in thousands)     |   |
| Beginning                balance                                   |   | $                                         | 4,433  |   | $ | 4,598 |   |
| Losses                charged against the allowance:               |   |                                      |   |   |   |   |   |
|   One-                to four-family loans               |   |                                      | 9      |   |   | 21 |   |
|   Consumer                loans                          |   |                                      | 1      |   |   | 13 |   |
|     Total                charge-offs           |   |                                      | 10     |   |   | 34 |   |
|   Recoveries                                             |   |                                      | --     |   |   | -- |   |
|   (Recovery)                provision charged to expense |   |                                      | (280   | ) |   | 268 |   |
| Ending                balance                                      |   | $                                         | 4,143  |   | $ | 4,832 |   |
|                                                               |   |                                      |   |   |   |   |   |
| Allowance                for loan losses to non-                   |   |                                      |   |   |   |   |   |
|   performing                loans                        |   |                                      | 62.01  | % |   | 50.56 | % |
| Allowance                for loan losses to loans                  |   |                                      |   |   |   |   |   |
|   receivable,                net                         |   |                                      | 0.08   | % |   | 0.09 | % |

----

**Mortgage-Related      Securities.**

|                                        |                                                                  | For                the Three Months Ended |
|---------------------------------------------|-----------------------------------------------------------------------|-------------------------------------------|
|                                        |                                                                  | December                31, 2006          |   | September                30, 2006 |   | June                30, 2006 |   | March                31, 2006 |
|                                        |                                                                  | Amount                                    | Yield |   | WAL |   | Amount | Yield |   | WAL |   | Amount | Yield |   | WAL |   | Amount | Yield |   | WAL |
| Mortgage-related                securities: | (Dollars                in thousands)                                 |
|                                        | Beginning                balance                                      |  $   2,084,786   | 4.54 | % | 4.39 |   |  $ 1,788,858  | 4.14 | % | 3.85 |   |  $ 1,839,593  | 4.01 | % | 3.30 |   |  $ 1,967,564  | 3.84 | % | 3.43 |
|                                        | Maturities                and repayments                              | (120,737)                                 |   |   |   |   | (124,473) |   |   |   |   | (135,663) |   |   |   |   | (127,409) |   |   |   |
|                                        | Sale                of securities, net of gains                       | (404,459)                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        | Net                amortization of premiums/discounts                 | (1,075)                                   |   |   |   |   | (1,222) |   |   |   |   | (1,709) |   |   |   |   | (1,662) |   |   |   |
|                                        | Purchases:                                                            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   Fixed                                                     |                                      |   |   |   |   |   |   |   |   |   | 10,092  | 6.50 |   | 1.65 |   | 983  | 5.65 |   | 7.88 |
|                                        |   Adjustable                                                | 108,135                              | 5.17 |   | 1.76 |   | 22,239  | 5.95 |   | 1.88 |   | 77,792  | 5.98 |   | 2.14 |   |   |   |   |   |
|                                        | Fair                value of securities received in exchange of loans |                                      |   |   |   |   | 395,828  | 5.73 |   | 7.15 |   |   |   |   |   |   |   |   |   |   |
|                                        | Other-than-temporary                impairment of AFS securities      |                                      |   |   |   |   | (472) |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        | Change                in valuation of securities:                     |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                        |   Available-for-sale                                        | 1,898                                |   |   |   |   | 4,028  |   |   |   |   | (1,247) |   |   |   |   | 117  |   |   |   |
|                                        | Ending                balance                                         |  $   1,668,548   | 4.26 | % | 3.48  |   |  $ 2,084,786  | 4.54 | % | 4.39 |   |  $ 1,788,858  | 4.14 | % | 3.85 |   |  $ 1,839,593  | 4.01 | % | 3.30 |

----

**Investment      Securities.**

|                                  |                                                  | For                the Three Months Ended                |
|---------------------------------------|-------------------------------------------------------|----------------------------------------------------------|
|                                  |                                                  | December                31, 2006                         |   | September                30, 2006 |   | June                30, 2006 |   | March                31, 2006 |
|                                  |                                                  | Amount                                                   | Yield |   | WAL |   | Amount | Yield |   | WAL |   | Amount | Yield |   | WAL |   | Amount | Yield |   | WAL |
| Investment                securities: | (Dollars                in thousands)                 |
|                                  | Beginning                balance                      |  $      429,480  | 4.46 | % | 2.63 |   |  $    382,128  | 4.35 | % | 3.09 |   |  $    380,518  | 4.41 | % | 2.84 |   |  $    430,517  | 4.54 | % | 2.73 |
|                                  | Maturities                and calls                   | (57,000)                                                 |   |   |   |   | (10,000) |   |   |   |   | (140,510) |   |   |   |   | (50,000) |   |   |   |
|                                  | Net                amortization of premiums/discounts | 1,042                                               |   |   |   |   | 114  |   |   |   |   | 10  |   |   |   |   | 1  |   |   |   |
|                                  | Purchases                - fixed rate                 | 471,140                                             | 5.18 |   | .68  |   | 56,730  | 5.36 |   | 1.72 |   | 142,413  | 5.32 |   | 1.27 |   |   |   |   |   |
|                                  | Change                in valuation of AFS securities  | (148)                                                    |   |   |   |   | 508  |   |   |   |   | (303) |   |   |   |   |   |   |   |   |
|                                  | Ending                balance                         |  $      844,514  | 4.82 | % | 1.66  |   |  $    429,480  | 4.46 | % | 2.63 |   |  $    382,128  | 4.35 | % | 3.09 |   |  $    380,518  | 4.41 | % | 2.84 |

----

**Liabilities.**

|                                   |   | At                                    |      |  At                                |   |  At                           |   |  At                            |   |
|----------------------------------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|------------------------------------|--------|-------------------------------------|--------|
|                                   |   | December                31, 2006      |      |  September                30, 2006 |   |  June                30, 2006 |   |  March                31, 2006 |   |
|                                   |   |                                  |      | Average                                 |   |  %                of          |   |                           |   | Average |   |  %                of |   |    |   | Average |   |  %                of |   |    |   | Average |   |  %                of |   |
|                                   |   | Amount                                |      | Cost                                    |   |  Total                        |   |  Amount                        |   | Cost |   |  Total |   |  Amount |   | Cost |   |  Total |   |  Amount |   | Cost |   |  Total |   |
|                                   |   | (Dollars                in thousands) |      |
| Checking                               |   | $                                     | 423,907   |                                    |   | 0.21                               | %      |                                | 10.77  | % |   | $                 402,898 |   |   | 0.21 | % |   | 10.33 | % |   | $                 420,933 |   |   | 0.21 | % |   | 10.80 | % |   | $                 433,913 |   |   | 0.21 | % |   | 10.81 | % |
| Passbook                & passcard |   |                                  | 101,960   |                                    |   | 0.65                               |   |                                | 2.59   |   |   | 106,347 |   |   | 0.65 |   |   | 2.73 |   |   | 113,018 |   |   | 0.65 |   |   | 2.90 |   |   | 118,582 |   |   | 0.65 |   |   | 2.95 |   |
| Money                market            |   |                                  | 823,151   |                                    |   | 3.33                               |   |                                | 20.92  |   |   | 808,910 |   |   | 3.31 |   |   | 20.74 |   |   | 834,419 |   |   | 3.15 |   |   | 21.42 |   |   | 854,350 |   |   | 2.53 |   |   | 21.28 |   |
| Certificates                           |   |                                  | 2,585,689 |                                    |   | 4.48                               |   |                                | 65.72  |   |   | 2,582,276 |   |   | 4.35 |   |   | 66.20 |   |   | 2,527,499 |   |   | 4.14 |   |   | 64.88 |   |   | 2,608,283 |   |   | 3.83 |   |   | 64.96 |   |
| Total                deposits          |   | $                                     | 3,934,707 |                                    |   | 3.68                               | %      |                                | 100.00 | % |   | $3,900,431 |   |   | 3.61 | % |   | 100.00 | % |   | $3,895,869 |   |   | 3.40 | % |   | 100.00 | % |   | $4,015,128 |   |   | 3.07 | % |   | 100.00 | % |

----

**Stockholders’      Equity. **

| Total                voting shares outstanding at September 30, 2006 |       | 74,031,930 |
|----------------------------------------------------------------------|------------|------------|
| Treasury                stock acquisitions (1)                       |       |       | (1,113) |
| RRP                grants, net of forfeitures                        |       |       | (400) |
| Options                exercised, net                                |       |       | 85,138 |
| Total                voting shares outstanding at December 31, 2006  |       | 74,115,555 |
| Unvested                shares in ESOP                               |       |       | (1,411,470) |
| Shares                held by MHC                                    |       |       | (52,192,817) |
| Total                public shares at December 31, 2006              | 20,511,268 |

----

|                                                     |   | Calendar                Year                                    |       |
|----------------------------------------------------------|--------|-----------------------------------------------------------------|------------|
|                                                     |   | 2007                                                            |       | 2006 |   | 2005 |   |
|                                                     |   | (Dollars                in thousands, except per share amounts) |       |
| Quarter                ended March 31                    |   |                                                            |       |   |   |   |   |
|   Number                of dividend shares     |   |                                                            | 20,519,318 |   |   | 20,457,283 |   |   | 20,634,728 |   |
|   Dividend                per share            |   | $                                                               | 0.50       |   | $ | 0.50 |   | $ | 0.50 |   |
|   Total                dividends paid          |   | $                                                               | 10,260     |   | $ | 10,229 |   | $ | 10,317 |   |
| Quarter                ended June 30                     |   |                                                            |       |   |   |   |   |   |   |   |
|   Number                of dividend shares     |   |                                                            |       |   |   | 20,257,420 |   |   | 20,393,519 |   |
|   Dividend                per share            |   |                                                            |       |   | $ | 0.50 |   | $ | 0.50 |   |
|   Total                dividends paid          |   |                                                            |       |   | $ | 10,129 |   | $ | 10,197 |   |
| Quarter                ended September 30                |   |                                                            |       |   |   |   |   |   |   |   |
|   Number                of dividend shares     |   |                                                            |       |   |   | 20,250,134 |   |   | 20,363,619 |   |
|   Dividend                per share            |   |                                                            |       |   | $ | 0.50 |   | $ | 0.50 |   |
|   Total                dividends paid          |   |                                                            |       |   | $ | 10,125 |   | $ | 10,182 |   |
| Quarter                ended December 31                 |   |                                                            |       |   |   |   |   |   |   |   |
|   Number                of dividend shares     |   |                                                            |       |   |   | 20,432,393 |   |   | 20,483,464 |   |
|   Dividend                per share            |   |                                                            |       |   | $ | 0.50 |   | $ | 0.50 |   |
|   Total                dividends paid          |   |                                                            |       |   | $ | 10,216 |   | $ | 10,242 |   |
| Special                year end dividend                 |   |                                                            |       |   |   |   |   |   |   |   |
|   Number                of dividend shares     |   |                                                            |       |   |   | 20,432,793 |   |   | 20,483,464 |   |
|   Dividend                per share            |   |                                                            |       |   | $ | 0.09 |   | $ | 0.30 |   |
|   Total                dividends paid          |   |                                                            |       |   | $ | 1,839 |   | $ | 6,145 |   |
|                                                     |   |                                                            |       |   |   |   |   |   |   |   |
| Calendar                year-to-date dividends per share |   | $                                                               | .50        |   | $ | 2.09 |   | $ | 2.30 |   |

----

**Analysis      of Net Interest Income**

**Average      Balance Sheet: **

|                                                                     |   | For                the Three Months Ended |      |
|--------------------------------------------------------------------------|--------|-------------------------------------------|-----------|
|                                                                     |   | December                31, 2006          |      | September                30, 2006 |   | June                30, 2006 |   | December                31, 2005 |   |
|                                                                     |   | Average                                   |      |   |   | Average |   |   |   | Average |   |   |   | Average |   |   |   |
|                                                                     |   | Outstanding                               |      | Yield/ |   | Outstanding |   | Yield/ |   | Outstanding |   | Yield/ |   | Outstanding |   | Yield/ |   |
|                                                                     |   | Balance                                   |      | Rate |   | Balance |   | Rate |   | Balance |   | Rate |   | Balance |   | Rate |   |
| Assets:                                                                  |   | (Dollars                in thousands)     |      |
|   Interest-earning                assets:                      |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Loans                receivable (1)        |   | $                                         | 5,235,039 |   |   | 5.59 | % | $ | 5,502,349 |   |   | 5.60 | % | $ | 5,541,566 |   |   | 5.50 | % | $ | 5,544,057 |   |   | 5.42 | % |
|      Mortgage-related                securities |   |                                      | 1,803,033 |   |   | 4.33 |   |   | 1,826,499 |   |   | 4.23 |   |   | 1,801,196 |   |   | 4.04 |   |   | 2,067,450 |   |   | 3.74 |   |
|      Investment                securities       |   |                                      | 574,857   |   |   | 4.65 |   |   | 412,013 |   |   | 4.42 |   |   | 372,980 |   |   | 4.47 |   |   | 430,505 |   |   | 4.55 |   |
|      Cash                and cash equivalents   |   |                                      | 236,522   |   |   | 5.15 |   |   | 93,095 |   |   | 5.03 |   |   | 122,098 |   |   | 4.85 |   |   | 8,658 |   |   | 3.62 |   |
|      Capital                stock of FHLB       |   |                                      | 165,159   |   |   | 6.48 |   |   | 163,997 |   |   | 6.23 |   |   | 165,584 |   |   | 6.02 |   |   | 182,262 |   |   | 5.19 |   |
|   Total                interest-earning assets (1)             |   |                                      | 8,014,610 |   |   | 5.24 |   |   | 7,997,953 |   |   | 5.23 |   |   | 8,003,424 |   |   | 5.12 |   |   | 8,232,932 |   |   | 4.95 |   |
|   Other                noninterest-earning assets              |   |                                      | 192,225   |   |   |   |   |   | 164,325 |   |   |   |   |   | 176,790 |   |   |   |   |   | 142,423 |   |   |   |   |
| Total                assets                                              |   | $                                         | 8,206,835 |   |   |   |   | $ | 8,162,278 |   |   |   |   | $ | 8,180,214 |   |   |   |   | $ | 8,375,355 |   |   |   |   |
|                                                                     |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and stockholders' equity:                     |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Interest-bearing                liabilities:                 |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Deposits                                   |   | $                                         | 3,855,407 |   |   | 3.65 |   | $ | 3,881,477 |   |   | 3.55 |   | $ | 3,916,142 |   |   | 3.24 |   | $ | 3,898,896 |   |   | 2.77 |   |
|      FHLB                advances (2)           |   |                                      | 3,271,001 |   |   | 4.89 |   |   | 3,215,093 |   |   | 4.89 |   |   | 3,211,783 |   |   | 4.79 |   |   | 3,441,450 |   |   | 4.53 |   |
|      Borrowings,                other           |   |                                      | 53,472    |   |   | 8.26 |   |   | 53,457 |   |   | 8.36 |   |   | 53,443 |   |   | 7.92 |   |   | 53,415 |   |   | 6.99 |   |
|   Total                interest-bearing liabilities            |   |                                      | 7,179,880 |   |   | 4.25 |   |   | 7,150,027 |   |   | 4.19 |   |   | 7,181,368 |   |   | 3.97 |   |   | 7,393,761 |   |   | 3.62 |   |
|   Other                noninterest-bearing liabilities         |   |                                      | 161,865   |   |   |   |   |   | 150,838 |   |   |   |   |   | 138,571 |   |   |   |   |   | 116,026 |   |   |   |   |
|   Stockholders'                equity                          |   |                                      | 865,090   |   |   |   |   |   | 861,413 |   |   |   |   |   | 860,275 |   |   |   |   |   | 865,568 |   |   |   |   |
| Total                liabilities and                                     |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       stockholders'                equity  |   | $                                         | 8,206,835 |   |   |   |   | $ | 8,162,278 |   |   |   |   | $ | 8,180,214 |   |   |   |   | $ | 8,375,355 |   |   |   |   |
| (continued)                                                              |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                               |   |   |    |   |   |   |   |   |    |   |   |   |   |   |    |   |   |
|------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|---------|--------|--------|
| Net                interest rate spread                                            |   |   |    |   |   | 0.99   | %      |   |    |   |   | 1.04   | %      |   |    |   |   | 1.15 | % |   |   |   |   | 1.33 | % |
| Net                interest-earning assets                                         |   | $      | 834,730 |   |   |   |   | $      | 847,926 |   |   |   |   | $      | 822,056 |   |   |   |   | $ | 839,171 |   |   |   |   |
| Net                interest margin                                                 |   |   |    |   |   | 1.39   | %      |   |    |   |   | 1.43   | %      |   |    |   |   | 1.54 | % |   |   |   |   | 1.64 | % |
| Ratio                of interest-earning assets                                    |   |   |    |   |   |   |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|       to                interest-bearing liabilities |   |   |    |   |   | 1.12   |   |   |    |   |   | 1.12   |   |   |    |   |   | 1.11 |   |   |   |   |   | 1.11 |   |
|                                                                               |   |   |    |   |   |   |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Selected                performance ratios:                                        |   |   |    |   |   |   |   |   |    |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|   Return                on average assets (annualized)                   |   |   |    |   |   | 0.50   | %      |   |    |   |   | 0.49   | %      |   |    |   |   | 0.55 | % |   |   |   |   | 0.64 | % |
|   Return                on average equity (annualized)                   |   |   |    |   |   | 4.74   | %      |   |    |   |   | 4.60   | %      |   |    |   |   | 5.26 | % |   |   |   |   | 6.15 | % |
|   Average                equity to average assets                        |   |   |    |   |   | 10.54  | %      |   |    |   |   | 10.55  | %      |   |    |   |   | 10.52 | % |   |   |   |   | 10.33 | % |

----

|                                                                                |   | For                    the Three Months Ended |                                                                |
|-------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------------------------------------------------------------------|
|                                                                                |   | December                    31,               |                                                                | September                    30, |   | June                    30, |   | March                    31, |   | December                    31, |   |
|                                                                                |   | 2006                                          |                                                                | 2006 |   | 2006 |   | 2006 |   | 2005 |   |
|  Selected                    income statement data:                            |   |                                          | (Dollars                    in thousands, except per share amounts) |   |
| Interest                    and dividend income:                                    |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Loans                    receivable                                     |   | $                                             | 73,192                                                              |   | $ | 77,034 |   | $ | 76,123 |   | $ | 75,505 |   | $ | 75,160 |   |
|   Mortgage-related                    securities                          |   |                                          | 19,521                                                              |   |   | 19,337 |   |   | 18,175 |   |   | 18,950 |   |   | 19,344 |   |
|   Investment                    securities                                |   |                                          | 6,684                                                               |   |   | 4,558 |   |   | 4,170 |   |   | 4,425 |   |   | 4,894 |   |
|   Other                    interest and dividend income                   |   |                                          | 5,769                                                               |   |   | 3,754 |   |   | 3,959 |   |   | 3,078 |   |   | 2,462 |   |
|      Total                    interest and dividend income |   |                                          | 105,166                                                             |   |   | 104,683 |   |   | 102,427 |   |   | 101,958 |   |   | 101,860 |   |
|                                                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense:                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Deposits                                                                |   |                                          | 35,469                                                              |   |   | 34,741 |   |   | 31,588 |   |   | 28,974 |   |   | 27,245 |   |
|   FHLB                    advances                                        |   |                                          | 40,741                                                              |   |   | 40,212 |   |   | 39,005 |   |   | 38,176 |   |   | 39,804 |   |
|   Other                    borrowings                                     |   |                                          | 1,129                                                               |   |   | 1,142 |   |   | 1,070 |   |   | 993 |   |   | 955 |   |
|      Total                    interest expense             |   |                                          | 77,339                                                              |   |   | 76,095 |   |   | 71,663 |   |   | 68,143 |   |   | 68,004 |   |
|                                                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Recovery)                    provision for loan losses                             |   |                                          | (280                                                                | ) |   | 77 |   |   | 40 |   |   | (138 | ) |   | 268 |   |
|                                                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest and dividend income                                 |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      (after                    (recovery) provision for    |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      loan                    losses)                       |   |                                          | 28,107                                                              |   |   | 28,511 |   |   | 30,724 |   |   | 33,953 |   |   | 33,588 |   |
|                                                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                    income                                                     |   |                                          | 6,215                                                               |   |   | 6,878 |   |   | 6,069 |   |   | 6,022 |   |   | 5,842 |   |
| Other                    expenses                                                   |   |                                          | 17,631                                                              |   |   | 19,175 |   |   | 18,174 |   |   | 17,943 |   |   | 17,592 |   |
| Income                    tax expense                                               |   |                                          | 6,440                                                               |   |   | 6,303 |   |   | 7,313 |   |   | 8,445 |   |   | 8,525 |   |
|      Net                    income                         |   | $                                             | 10,251                                                              |   | $ | 9,911 |   | $ | 11,306 |   | $ | 13,587 |   | $ | 13,313 |   |
|                                                                                |   |                                          |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                    earnings per share                                         |   | $                                             | 0.14                                                                |   | $ | 0.14 |   | $ | 0.16 |   | $ | 0.19 |   | $ | 0.18 |   |
| Diluted                    earnings per share                                       |   | $                                             | 0.14                                                                |   | $ | 0.14 |   | $ | 0.15 |   | $ | 0.19 |   | $ | 0.18 |   |
| Dividends                    declared per share                                     |   | $                                             | 0.59                                                                |   | $ | 0.50 |   | $ | 0.50 |   | $ | 0.50 |   | $ | 0.80 |   |

----

**Comparison      of Operating Results for the Three Months Ended December 31, 2006 and      2005**

----

----

|                                                          |   | Quarter                Ended December 31, |    |
|---------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                          |   | 2006                vs. 2005              |    |
|                                                          |   | Increase                (Decrease) Due to |    |
|                                                          |   |                                      |    |   |   |   |   |
|                                                          |   | Volume                                    |    | Rate |   | Total |   |
|                                                          |   | (Dollars                in thousands)     |    |
| Interest-earning                assets:                       |   |                                      |    |   |   |   |   |   |   |   |
| Loans                receivable, net                          |   | $                                         | (4,235  | ) | $ | 2,267 |   | $ | (1,968 | ) |
| Mortgage-related                securities                    |   |                                      | (754    | ) |   | 931 |   |   | 177 |   |
| Investment                securities                          |   |                                      | 1,676   |   |   | 114 |   |   | 1,790 |   |
| Capital                stock of FHLB                          |   |                                      | (190    | ) |   | 506 |   |   | 316 |   |
| Cash                and cash equivalents                      |   |                                      | 2,944   |   |   | 47 |   |   | 2,991 |   |
| Total                interest-earning assets                  |   | $                                         | (559    | ) | $ | 3,865 |   | $ | 3,306 |   |
|                                                          |   |                                      |    |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                  |   |                                      |    |   |   |   |   |   |   |   |
| Passbook                and passcard                          |   | $                                         | (21     | ) | $ | 3 |   | $ | (18 | ) |
| Checking                                                      |   |                                      | 1       |   |   | 20 |   |   | 21 |   |
| Money                market                                   |   |                                      | (306    | ) |   | 2,122 |   |   | 1,816 |   |
| Certificates                                                  |   |                                      | 248     |   |   | 6,157 |   |   | 6,405 |   |
| FHLB                advances and other borrowings             |   |                                      | (23,540 | ) |   | 24,651 |   |   | 1,111 |   |
| Total                interest-bearing liabilities             |   | $                                         | (23,618 | ) | $ | 32,953 |   | $ | 9,335 |   |
|                                                          |   |                                      |    |   |   |   |   |   |   |   |
| Net                change in net interest and dividend income |   | $                                         | 23,059  |   | $ | (29,088 | ) | $ | (6,029 | ) |

----

**Comparison      of Operating Results for the Three Months Ended December 31, 2006 and September      30, 2006**

----

|                                                          |   | Quarter                Ended                            |   |
|---------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                                          |   | December                31, 2006 vs. September 30, 2006 |   |
|                                                          |   | Increase                (Decrease) Due to               |   |
|                                                          |   |                                                    |   |   |   |   |   |
|                                                          |   | Volume                                                  |   | Rate |   | Total |   |
|                                                          |   | (Dollars                in thousands)                   |   |
| Interest-earning                assets:                       |   |                                                    |   |   |   |   |   |   |   |   |
| Loans                receivable, net                          |   | $                                                       | (3,670 | ) | $ | (172 | ) | $ | (3,842 | ) |
| Mortgage-related                securities                    |   |                                                    | (215   | ) |   | 399 |   |   | 184 |   |
| Investment                securities                          |   |                                                    | 1,883  |   |   | 243 |   |   | 2,126 |   |
| Capital                stock of FHLB                          |   |                                                    | 18     |   |   | 107 |   |   | 125 |   |
| Cash                and cash equivalents                      |   |                                                    | 1,861  |   |   | 29 |   |   | 1,890 |   |
| Total                interest-earning assets                  |   | $                                                       | (123   | ) | $ | 606 |   | $ | 483 |   |
|                                                          |   |                                                    |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                  |   |                                                    |   |   |   |   |   |   |   |   |
| Passbook                and passcard                          |   | $                                                       | (8     | ) | $ | (5 | ) | $ | (13 | ) |
| Checking                                                      |   |                                                    | (1     | ) |   | 19 |   |   | 18 |   |
| Money                market                                   |   |                                                    | (56    | ) |   | 121 |   |   | 65 |   |
| Certificates                                                  |   |                                                    | (131   | ) |   | 789 |   |   | 658 |   |
| FHLB                advances and other borrowings             |   |                                                    | 503    |   |   | 13 |   |   | 516 |   |
| Total                interest-bearing liabilities             |   | $                                                       | 307    |   | $ | 937 |   | $ | 1,244 |   |
|                                                          |   |                                                    |   |   |   |   |   |   |   |   |
| Net                change in net interest and dividend income |   | $                                                       | (430   | ) | $ | (331 | ) | $ | (761 | ) |

**Liquidity      and Capital Resources**

----

**Off      Balance Sheet Arrangements, Commitments and Contractual      Obligations**

| ·   | the                origination, purchase or sale of                loans, |
|--------------------|---------------------------------------------------------------------------|

| ·   | the                purchase or sale of investment and mortgage-related                securities, |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | extensions                of credit on home equity loans and construction                loans, |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | terms                and conditions of operating leases,                and |
|--------------------|-----------------------------------------------------------------------------|

| ·   | funding                withdrawals of savings accounts at                maturity. |
|--------------------|------------------------------------------------------------------------------------|

----

|                                                     |   | **Maturity                Range** |      |
|----------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                     |   |                              |      | **Less                than** |   |  **1                - 3** |   | **3                - 5** |   | **More                than** |   |
|                                                     |   | **Total**                         |      | **1                year** |   | **years** |   | **years** |   | **5                years** |   |
|                                                     |   | December                31, 2006  |      |
|                                                     |   |                              |      |   |   |   |   |   |   |   |   |
| FHLB                Advances                             |   | $                                 | 3,296,000 |   | $ | 950,000 |   | $ | 1,720,000 |   | $ | 626,000 |   | $ | -- |   |
|                                                     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificates                of Deposit                   |   |                              | 2,585,689 |   |   | 1,457,136 |   |   | 1,050,169 |   |   | 77,077 |   |   | 1,307 |   |
|                                                     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commitments                to originate and              |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    purchase                mortgage loans |   |                              | 74,523    |   |   | 74,523 |   |   | -- |   |   | -- |   |   | -- |   |
|                                                     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commitments                to fund unused home           |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    equity                lines of credit  |   |                              | 271,328   |   |   | 271,328 |   |   | -- |   |   | -- |   |   | -- |   |
|                                                     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unadvanced                portion of                     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    construction                loans      |   |                              | 17,244    |   |   | 17,244 |   |   | -- |   |   | -- |   |   | -- |   |

|                           |              |                                      | Actual                    rates |                             | Effective                     |   |
|--------------------------------|-------------------|-------------------------------------------|---------------------------------|----------------------------------|-------------------------------|--------|
|                           |              |                                      | without                         |                             | rates                    with |   |
| Maturity                    by |              | interest                    rate          |                            | interest                    rate |                          |
| Fiscal                    year | Amount            | swaps                                     |                            | swaps                            |                          |
|                           |              | (Dollars                    in thousands) |                            |                             |                          |   |
|                           | 2007              | $                    750,000              | 3.52                            | %                                | 3.52                          | %      |
|                           | 2008              | 1,125,000                                 | 4.23                            |                             | 4.65                          |   |
|                           | 2009              | 620,000                                   | 4.27                            |                             | 4.27                          |   |
|                           | 2010              | 775,000                                   | 5.90                            |                             | 7.03                          |   |
|                           | 2011              | 26,000                                    | 5.09                            |                             | 5.09                          |   |
|                           |   Total | $                    3,296,000            | 4.48                            | %                                | 4.88                          | %      |

|                                     |                                |                                    | Weighted |   |
|------------------------------------------|-------------------------------------|-----------------------------------------|----------|--------|
|                                     |                                | Average                                 |     |
| Maturity                  by Quarter End | Amount                              | Rate                                    |     |
|                                     |                                | (Dollars                  in thousands) |     |   |
|                                     | March                  31, 2007     | $                  200,000              | 3.37     | %      |
|                                     | June                  30, 2007      | 200,000                                 | 3.49     |   |
|                                     | September                  30, 2007 | 350,000                                 | 3.63     |   |
|                                     |                                | $                  750,000              | 3.52     | %      |

----

**Contingencies**

**Capital**

|                                     |   |   | Regulatory                               |
|------------------------------------------|--------|--------|------------------------------------------|
|                                     |   |   | Requirement                              |
|                                     | Bank   |   | For                “Well           |
|                                     | Ratios |   | Capitalized”                Status |
| Core                capital              | 9.6%   |   | 5.0%                                     |
| Tier                I risk-based capital | 22.3%  |   | 6.0%                                     |
| Total                risk-based capital  | 22.2%  |   | 10.0%                                    |

**Item      3.   Quantitative and Qualitative Disclosure About Market      Risk**

----

| **Percentage                Change in Net Interest Income (next four                quarters)** |   |                               |   |                                            |
|-------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|-------------------------------------------------|
|                                                                                            |   | At                                 |
| Change                (in Basis Points)                                                         |   |                               |   |                                            |   |   |   |   |   |   |
| in                Interest Rates(1)                                                        |   | December                  31, 2006 |   | September                              30, 2006 |   | June                          30, 2006 |   | March                          31, 2006 |   | December                            31,2005 |
| -200                bp                                                                          |   | 6.44                               |   | 9.98                                            |   | 9.98 |   | 3.51 |   | 4.12 |
| -100                bp                                                                          |   | 6.43                               |   | 8.58                                            |   | 7.81 |   | 4.88 |   | 5.87 |
| 0                bp                                                                             |   | --                                 |   | --                                              |   | -- |   | -- |   | -- |
| +100                bp                                                                |   | -10.63                             |   | -12.54                                          |   | -9.54 |   | -6.66 |   | -9.11 |
| +200                bp                                                                |   | -23.32                             |   | -27.20                                          |   | -20.25 |   | -14.76 |   | -19.80 |
| +300                bp                                                                |   | -37.23                             |   | -42.87                                          |   | -31.55 |   | -23.43 |   | -31.26 |

----

| **Percentage                Change in MVPE** |   |                               |   |                                |   |                           |
|----------------------------------------------|--------|------------------------------------|--------|-------------------------------------|--------|--------------------------------|
|                                         |   | At                                 |
| Change                (in Basis Points)      |   |                               |   |                                |   |                           |   |   |   |   |
| in                Interest Rates(1)     |   | December                  31, 2006 |   | September                  30, 2006 |   | June                  30, 2006 |   |  March                31, 2006 |   | December                31, 2005 |
| -200                bp                       |   | 4.02                               |   | 6.69                                |   | 14.92                          |   | 5.43 |   | 1.84 |
| -100                bp                       |   | 5.68                               |   | 8.09                                |   | 12.83                          |   | 7.81 |   | 6.30 |
| 0                bp                          |   | --                                 |   | --                                  |   | --                             |   | -- |   | -- |
| +100                bp             |   | -12.34                             |   | -15.59                              |   | -16.70                         |   | -12.48 |   | -13.09 |
| +200                bp             |   | -27.52                             |   | -34.07                              |   | -35.37                         |   | -26.77 |   | -28.60 |
| +300                bp             |   | -44.57                             |   | -54.36                              |   | -56.03                         |   | -42.78 |   | -45.47 |

----

----

**Gap      Table**

|                                                                                                      |   |   |   | Within                Three Months |      | Three                Months To One Year |      | More                Than One Year to Three Years |   | More                Than Three Years to Five Years |      | Over                Five Years |      | Total   |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------------------------|-----------|-----------------------------------------|-----------|--------------------------------------------------|--------|----------------------------------------------------|-----------|--------------------------------|-----------|---------|--------|
|                                                                                                      |   |   |   |                               |      |
| Interest-earning                assets:            |   |   |   |                               |      |                                    |      |                                             |   | (Dollars  in thousands)        |      |                           |      |    |   |   |   |
| Loans                receivable(1)(2):                                                                    |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
| Mortgage                loans:                                                                            |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
| Fixed                                                                                                     |   |   | $      | 156,113                            |      | $                                       | 419,490   |                                             | $      |                   855,297                |      | $                              | 584,250   |    | $      | 1,134,014 |   | $ | 3,149,164 |   |
| Adjustable                                                                                                |   |   |   | 159,741                            |      |                                    | 509,656   |                                             |   | 774,117                                            |      |                           | 413,599   |    |   | 14,160 |   |   | 1,871,273 |   |
| Other                loans                                                                                |   |   |   | 155,900                            |      |                                    | 5,466     |                                             |   | 9,378                                              |      |                           | 7,006     |    |   | 45,551 |   |   | 223,301 |   |
| Securities:                                                                                               |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
| Non-mortgage(3)                                                                                           |   |   |   | 179,612                            |      |                                    | 349,679   |                                             |   | 258,488                                            |      |                           | 484       |    |   | 56,194 |   |   | 844,457 |   |
| Mortgage-related                securities(4)                                                             |   |   |   | 174,887                            |      |                                    | 376,868   |                                             |   | 768,146                                            |      |                           | 135,771   |    |   | 213,669 |   |   | 1,669,341 |   |
| Other                interest-earning assets                                                              |   |   |   | 126,500                            |      |                                    | --        |                                             |   | --                                                 |      |                           | --        |    |   | -- |   |   | 126,500 |   |
| Total                interest-earning assets                                                              |   |   |   | 952,753                            |      |                                    | 1,661,159 |                                             |   | 2,665,426                                          |      |                           | 1,141,110 |    |   | 1,463,588 |   |   | 7,884,036 |   |
|                                                                                                      |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                              |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Deposits:                                                                                                 |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Passbook                and passcard(5)                                                                   |   |   |   |                               | 2,116     |                                    |      | 6,347                                            |   |                                               | 17,130    |                           |      | 14,377  |   |   | 61,990 |   |   | 101,960 |   |
| Checking                (5)                                                                               |   |   |   |                               | 9,213     |                                    |      | 27,640                                           |   |                                               | 69,584    |                           |      | 58,096  |   |   | 259,374 |   |   | 423,907 |   |
| Money                market (5)                                                                           |   |   |   |                               | 36,424    |                                    |      | 109,273                                          |   |                                               | 196,733   |                           |      | 151,186 |   |   | 329,535 |   |   | 823,151 |   |
| Certificates                                                                                              |   |   |   |                               | 321,975   |                                    |      | 1,135,162                                        |   |                                               | 1,050,169 |                           |      | 77,077  |   |   | 1,306 |   |   | 2,585,689 |   |
| Borrowings(6)                                                                                             |   |   |   |                               | 1,000,000 |                                    |      | 750,000                                          |   |                                               | 1,320,000 |                           |      | 226,000 |   |   | 53,609 |   |   | 3,349,609 |   |
| Total                interest-bearing liabilities                                                         |   |   |   | 1,369,728                          |      |                                    | 2,028,422 |                                             |   | 2,653,616                                          |      |                           | 526,736   |    |   | 705,814 |   |   | 7,284,316 |   |
|                                                                                                      |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Excess                (deficiency) of interest-earning assets over                                        |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
|   interest-bearing                liabilities                                                   |   |   |   | $                                  | (416,975  | )                                       | $         | (367,263                                         | )      | $                                                  | 11,810    |                           | $         | 614,374 |   | $ | 757,774 |   | $ | 599,720 |   |
|                                                                                                      |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Cumulative                excess (deficiency) of interest-earning                                         |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
|   assets                over interest-bearing liabilities                                       |   |   | $      | (416,975                           | )         | $                                       | (784,238  | )                                                | $      | (772,428                                           | )         | $                              | (158,054  | )       | $      | 599,720 |   |   |  |   |
|                                                                                                      |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |   |
| Cumulative                excess (deficiency) of interest-earning                                         |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
|   assets                over interest-bearing liabilities as a                                  |   |   |   |                               |      |                                    |      |                                             |   |                                               |      |                           |      |    |   |   |   |   |   |   |
|    percent                of total assets at December 31, 2006                             |   |   |   | (5.08                              | )%        |                                    | (9.56     | )%                                               |   | (9.41                                              | )%        |                           | (1.93     | )%      |   | 7.31 | % |   |   |   |
| Cumulative                one-year gap at September 30, 2006                                              |   |   |   |                               |      |                                    | (13.62    | )                                                |   |                                               |      |                           |      |    |   |   |   |   |   |   |
| Cumulative                one-year gap at September 30, 2005                                              |   |   |   |                               |      |                                    | (4.01     | )                                                |   |                                               |      |                           |      |    |   |   |   |   |   |   |

----

|     |                                  |                     | Paying                        |                   |                   |
|----------|---------------------------------------|--------------------------|-------------------------------|------------------------|------------------------|
| Fiscal   |                                  | Notional                 | 1                Month        |                   |                   | Receiving |   |
| Year     | Fair                                  | Principal                | LIBOR                         |                   | Interest               | Interest |   |
| Maturity | Value(1)                              | Amount                   | Rate                (2)  | Margin                 | Rate                   | Rate | Spread |
|     | (Dollars                in thousands) |                     |                          |                   |                   |   |
| 2008     | $                (5,591)              | $                225,000 | 5.35%                         | 2.41%                  | 7.76%                  | 5.68% | (2.08)% |
| 2010     | (20,284)                              | 575,000                  | 5.35           | 2.51    | 7.86    | 6.35    | (1.51)    |
|     | $                (25,875)             | $                800,000 | 5.35%                         | 2.48%                  | 7.83%                  | 6.16% | (1.67)% |

----

**Changes      in portfolio composition.**

|                                                               |   | For                the Three Months Ended |    |  For                the Three Months Ended |   |
|--------------------------------------------------------------------|--------|-------------------------------------------|---------|-------------------------------------------------|--------|
|                                                               |   | December                31, 2006          |    |  December                31, 2005          |   |
|                                                               |   | Amount                                    |    | Rate                                            |   | %                of Total |   |  Amount |   | Rate |   | %                of Total |   |
| Fixed-rate:                                                        |   | (Dollars                in thousands)     |    |
|    One-                to four-family               |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       <=                15 years  |   | $                                         | 20,607  |                                            |   | 5.75 | % |   | 10.52 | % | $ | 39,661 |   |   | 5.38 | % |   | 11.47 | % |
|       >                15 years   |   |                                      | 105,039 |                                            |   | 6.11 |   |   | 53.63 |   |   | 112,836 |   |   | 5.83 |   |   | 32.64 |   |
|    Other                real estate                 |   |                                      | 773     |                                            |   | 6.75 |   |   | 0.40 |   |   | 6,057 |   |   | 6.29 |   |   | 1.75 |   |
|    Non                real estate                   |   |                                      | 9,047   |                                            |   | 7.93 |   |   | 4.62 |   |   | 9,321 |   |   | 7.42 |   |   | 2.70 |   |
|     Total                fixed-rate            |   |                                      | 135,466 |                                            |   | 6.18 |   |   | 69.17 |   |   | 167,875 |   |   | 5.83 |   |   | 48.56 |   |
|                                                               |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustable-rate:                                                   |   |                                      |    |                                            |   |   |   |   |  |   |   |   |   |   |   |   |   |  |   |
|    One-                to four-family               |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       <=                36 months |   |                                      | 5,892   |                                            |   | 5.40 |   |   | 3.01 |   |   | 41,119 |   |   | 4.67 |   |   | 11.91 |   |
|       >                36 months  |   |                                      | 33,380  |                                            |   | 5.72 |   |   | 17.04 |   |   | 110,487 |   |   | 5.07 |   |   | 31.96 |   |
|    Non                real estate                   |   |                                      | 21,107  |                                            |   | 8.58 |   |   | 10.78 |   |   | 26,176 |   |   | 7.73 |   |   | 7.57 |   |
|     Total                adjustable-rate       |   |                                      | 60,379  |                                            |   | 6.69 |   |   | 30.83 |   |   | 177,782 |   |   | 5.37 |   |   | 51.44 |   |
|                                                               |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                loan originations and purchases               |   | $                                         | 195,845 |                                            |   | 6.34 | % |   | 100.00 | % | $ | 345,657 |   |   | 5.59 | % |   | 100.00 | % |
|                                                               |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchased                loans included above:                     |   |                                      |    |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Fixed-rate                purchased loans              |   | $                                         | 11,676  |                                            |   | 6.19 | % |   |   |   | $ | 34,082 |   |   | 5.64 | % |   |   |   |
|   Adjustable-rate                purchased loans         |   | $                                         | 14,696  |                                            |   | 5.81 | % |   |   |   | $ | 115,910 |   |   | 4.92 | % |   |   |   |

----

The      following table presents the distribution of our loan portfolio at the dates      indicated. Our loan portfolio remains primarily weighted in fixed-rate loans.      

|                                                                                 |   | December                31, 2006      |      |  September                30, 2006 |   |
|--------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|
|                                                                                 |   | Amount                                |      | Rate                                    |   |  %                of Total |   |  Amount |   | Rate |   |  %                of Total |   |
|                                                                                 |   | (Dollars                in thousands) |      |
| Fixed-rate                loans:                                                     |   |                                  |      |                                    |   |    |   |    |   |   |   |    |   |
| One-                to four- family real estate:                                     |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       <=                15 years                (1) |   | $                                     | 1,105,279 |                                    |   | 5.31 | % |   | 21.01 | % | $ | 1,127,945 |   |   | 5.30 | % |   | 21.45 | % |
|       >                15 years (1)                 |   |                                  | 1,970,934 |                                    |   | 5.95 |   |   | 37.47 |   |   | 1,903,789 |   |   | 5.95 |   |   | 36.21 |   |
| Other                real estate                                                     |   |                                  | 85,031    |                                    |   | 6.35 |   |   | 1.62 |   |   | 86,761 |   |   | 6.34 |   |   | 1.65 |   |
| Non                real estate                                                       |   |                                  | 70,798    |                                    |   | 7.63 |   |   | 1.35 |   |   | 67,083 |   |   | 7.57 |   |   | 1.28 |   |
|      Total                fixed-rate loans                  |   |                                  | 3,232,042 |                                    |   | 5.78 |   |   | 61.45 |   |   | 3,185,578 |   |   | 5.76 |   |   | 60.59 |   |
|                                                                                 |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustable-rate                loans:                                                |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-                to four- family real estate:                                     |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       <=                36 months (2)               |   |                                  | 1,032,723 |                                    |   | 4.80 |   |   | 19.63 |   |   | 989,316 |   |   | 4.76 |   |   | 18.82 |   |
|       >                36 months (2)                |   |                                  | 831,427   |                                    |   | 5.18 |   |   | 15.81 |   |   | 910,455 |   |   | 5.13 |   |   | 17.32 |   |
| Other                real estate                                                     |   |                                  | 10,930    |                                    |   | 5.66 |   |   | 0.21 |   |   | 15,465 |   |   | 5.33 |   |   | 0.29 |   |
| Non                real estate                                                       |   |                                  | 152,735   |                                    |   | 8.62 |   |   | 2.90 |   |   | 156,659 |   |   | 8.63 |   |   | 2.98 |   |
|      Total                adjustable-rate loans             |   |                                  | 2,027,815 |                                    |   | 5.25 |   |   | 38.55 |   |   | 2,071,895 |   |   | 5.22 |   |   | 39.41 |   |
|         Total                loans           |   |                                  | 5,259,857 |                                    |   | 5.57 | % |   | 100.00 | % |   | 5,257,473 |   |   | 5.55 | % |   | 100.00 | % |
|                                                                                 |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Loans                in process                                          |   |                                  | 17,244    |                                    |   |   |   |   |   |   |   | 22,605 |   |   |   |   |   |   |   |
|   Unearned                fees and deferred costs                          |   |                                  | 9,438     |                                    |   |   |   |   |   |   |   | 9,318 |   |   |   |   |   |   |   |
|   Allowance                for loan losses                                 |   |                                  | 4,143     |                                    |   |   |   |   |   |   |   | 4,433 |   |   |   |   |   |   |   |
|      Total                loans receivable, net             |   | $                                     | 5,229,032 |                                    |   |   |   |   |   |   | $ | 5,221,117 |   |   |   |   |   |   |   |
|                                                                                 |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | Loans                are reported based on their remaining term to maturity as of the                date                indicated. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Loans                are reported based on their term to next rate reset as of the date                indicated. |
|-----------------|-------------------------------------------------------------------------------------------------------------------|

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|                                                                             |   | December                31, 2006      |      |  September                30, 2006 |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|
|                                                                             |   | Balance                               |      | WAL                                     |   | Yield |   |  Balance |   | WAL |   | Yield |   |
|                                                                             |   | (Dollars                in thousands) |      |
| Fixed-rate                investments:                                           |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                bonds                                                      |   | $                                     | 837,693   |                                    |   | 1.62 |   |   | 4.83 | % | $ | 428,074 |   |   | 2.62 |   |   | 4.46 | % |
| Mortgage-related                securities, at cost                              |   |                                  | 635,904   |                                    |   | 4.09 |   |   | 4.55 |   |   | 662,480 |   |   | 4.29 |   |   | 4.58 |   |
| Municipal                bonds                                                   |   |                                  | 6,764     |                                    |   | 7.05 |   |   | 3.61 |   |   | 1,201 |   |   | 6.09 |   |   | 3.90 |   |
|    Total                fixed-rate investments                    |   |                                  | 1,480,361 |                                    |   | 2.71 |   |   | 4.70 |   |   | 1,091,755 |   |   | 3.64 |   |   | 4.53 |   |
|                                                                             |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustable-rate                investments:                                      |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-related                securities, at cost                              |   |                                  | 1,033,437 |                                    |   | 3.10 |   |   | 4.08 |   |   | 1,028,093 |   |   | 3.38 |   |   | 4.04 |   |
|    Total                adjustable-rate investments               |   |                                  | 1,033,437 |                                    |   | 3.10 |   |   | 4.08 |   |   | 1,028,093 |   |   | 3.38 |   |   | 4.04 |   |
|      Total                investment portfolio, at cost |   | $                                     | 2,513,798 |                                    |   | 2.87 |   |   | 4.45 | % | $ | 2,119,848 |   |   | 3.51 |   |   | 4.29 | % |

|                                        |   | December                31, 2006      |      |  September                30, 2006 |   |
|---------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------------|--------|
|                                        |   | Amount                                |      | Rate                                    |   |  Amount |   | Rate |   |
|                                        |   | (Dollars                in thousands) |      |
| Certificates                maturing within |   |                                  |           |                                    |   |  |   |   |  |   |   |  |   |
| 0                to 3 months                |   | $                                     | 321,975   |                                    |   | 4.02 | % | $ | 518,974 |   |   | 4.40 | % |
| 3                to 6 months                |   |                                  | 460,940   |                                    |   | 4.41 |   |   | 314,279 |   |   | 4.04 |   |
| 6                months to one year         |   |                                  | 674,221   |                                    |   | 4.44 |   |   | 825,885 |   |   | 4.45 |   |
| One                year to two years        |   |                                  | 858,453   |                                    |   | 4.70 |   |   | 695,580 |   |   | 4.38 |   |
| After                two years              |   |                                  | 270,100   |                                    |   | 4.54 |   |   | 227,558 |   |   | 4.23 |   |
| Total                certificates           |   | $                                     | 2,585,689 |                                    |   | 4.48 | % | $ | 2,582,276 |   |   | 4.35 | % |
|                                        |   |                                  |      |                                    |   |   |   |   |   |   |   |   |   |
| Average                maturity (in years)  |   |                                  | 1.04      |                                    |   |   |   |   | 0.94 |   |   |   |   |

----

**Item      4**
**.      Controls and Procedures**

**Changes      in Internal Control Over Financial Reporting**

**Part II -   OTHER      INFORMATION**

**Item      1.  Legal Proceedings**

**Item      1A. Risk Factors**

----

**Item      2.  Unregistered Sales of Equity Securities and Use of      Proceeds** 

|                                               | Total                    |                          | Total                Number of     | Maximum                Number     |
|----------------------------------------------------|--------------------------|-------------------------------|------------------------------------|-----------------------------------|
|                                               | Number                of | Average                       | Shares                Purchased as | of                Shares that May |
|                                               | Shares                   | Price                Paid     | Part                of Publicly    | Yet                Be Purchased   |
| Period                                             | Purchased                | per                Share      | Announced                Plans     | Under                the Plan     |
| October                1, 2006 through             |                     |                          |                               |                              |
|    October                31, 2006  | --                       | --                            | --                                 | 499,661                           |
| November                1, 2006 through            |                     |                          |                               |                              |
|    November                30, 2006 | 1,113                    |     --(1) | 1,113                              | 498,548                           |
| December                1, 2006 through            |                     |                          |                               |                              |
|    December                31, 2006 | --                       | --                            | --                                 | 498,548                           |
|      Total                | 1,113                    | --                            | 1,113                              | 498,548                           |

**Item      3.  Defaults Upon Senior Securities**

**<Index>**

----

**Item      4.  Submission of Matters to a Vote of Security Holders**

|                                                             | Number                of Votes |
|------------------------------------------------------------------|--------------------------------|
|                                                             |                           |   |   | Broker |
|                                                             | For                            | Against | Abstain | Non-Votes |
| **Proposal                1.**                                   |                           |   |   |   |
| Election                of the following directors for the terms |                           |   |   |   |
| indicated:                                                       |                           |   |   |   |
| John                B. Dicus (three years)                       | 71,159,362                     | 204,160 | -- | -- |
| Jeffrey                R. Thompson (three years)                 | 71,171,490                     | 192,032 | -- | -- |
|                                                             |                           |   |   |   |
| The                following directors had their term of office  |                           |   |   |   |
| continue                after the meeting:                       |                           |   |   |   |
| Jeffrey                M. Johnson                                |                           |   |   |   |
| Michael                T. McCoy, M.D.                            |                           |   |   |   |
| Marilyn                S. Ward                                   |                           |   |   |   |
| B.B.                Anderson                                     |                           |   |   |   |
| John                C. Dicus                                     |                           |   |   |   |
|                                                             |                           |   |   |   |
| **Proposal                2.**                                   |                           |   |   |   |
| Ratification                of Deloitte & Touche LLP         |                           |   |   |   |
| as                auditors.                                      | 71,254,181                     | 79,078 | 30,263 | -- |

**<Index>**

**Item      5.  Other Information**

**<Index>**

**Item      6.  Exhibits**

----

**SIGNATURES**

<Index>

----

**INDEX      TO EXHIBITS**

| ExhibitNumber                       |  Document |
|-------------------------------------|----------------|
|      2.0   |           | Plan                of Reorganization and Stock Issuance Plan* |
|      3(i)  |           | Federal                Stock Charter of Capitol Federal Financial* |
|      3(ii) |           | Bylaws                of Capitol Federal Financial filed on August 4, 2004 as Exhibit 3(ii)                to |
|                                |           | the                June 30, 2004 Form 10-Q and incorporated herein by                reference |
|      4(i)  |           | Form                of Stock Certificate of Capitol Federal Financial* |
|      4(ii) |           | The                Registrant agrees to furnish to the Securities and Exchange Commission,                upon request, the |
|                                |           | instruments                defining the rights of the holders of the Registrant’s long-term debt |
|    10.1              |           | Registrant’s                Thrift and Stock Ownership Plan filed on December 14, 2005 as Exhibit                10.1                to |
|                                |           | the                Annual Report on Form 10-K and incorporated herein by                reference |
|    10.2              |           | Registrant’s                2000 Stock Option and Incentive Plan (the “Stock Option Plan”) filed on                April 13, |
|                                |           | 2000                as Appendix A to Registrant’s Revised Proxy Statement (File No. 000-25391)                and incorporated herein by reference |
|    10.3              |           | Registrant’s                2000 Recognition and Retention Plan (the “RRP”) filed on April 13, 2000 as |
|                                |           | Appendix                B to Registrant’s Revised Proxy Statement (File No. 000-25391) and                incorporated herein by reference |
|    10.4              |           | Capitol                Federal Financial Deferred Incentive Bonus Plan filed on December                14, 2006 |
|                                |           | as                Exhibit 10.4 to the Annual Report on Form 10-K 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 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 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 and incorporated herein by reference |
|    10.8              |           | Description                of Named Executive Officer Salary and Bonus Arrangements filed on                December                14, |
|                                |           | 2006                as Exhibit 10.8 to the Annual Report on Form 10-K and incorporated                herein                by reference |
|    10.9              |           | Description                of Director Fee Arrangements |
|    10.10             |           | Short-term                Performance Plan filed on December 14, 2005 as Exhibit 10.10 to the                Annual |
|                                |           | Report                on Form 10-K for the fiscal year ended September 30, 2005 and incorporated                herein by reference |
|    11                |           | Statement                re: computation of earnings per share** |
|    31.1              |           | Certification                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 made by                John B.                Dicus, 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, Chief Executive                Officer, and Kent G. Townsend, Executive Vice President, Chief Financial                Officer and Treasurer |

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