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TheStreet Open House

10 Bank Stocks Beating Analysts' Price Targets

3. Capitol Federal Financial

Shares of Capitol Federal Financial (CFFN) of Topeka, Kan., closed at $10.97 Monday. The shares were flat year-to-date, but were 24% higher than the consensus price target of $8.87 at the end of last year.

The company had $9.5 billion in total assets as of Sept. 30, with 35 traditional branches and 10 in-store branches, mainly in the Topeka, Wichita and Kansas City areas.

The holding company completed its second-step conversion from a mutual thrift holding company to full stock ownership last December, raising a net $1.13 billion in common equity in the process. When Capitol Federal announced its financial results for its Fiscal 2011, ended Sept. 30, it also announced a special year-end dividend of 10 cents a share.

Based on a regular quarterly payout of eight cents, the shares have a 2.73% dividend yield.

Fiscal fourth-quarter net income was $16.8 million, or 10 cents a share, compared to $15.5 million, or an adjusted nine cents a share, a year earlier. Net interest income for the fiscal fourth quarter increased 7% from a year earlier to $43.9 million. The net interest margin was 1.89%, declining from 1.99% a year earlier.

The ROA for the fiscal fourth quarter was 0.70%.

Asset quality was strong, with nonperforming loans making up just 0.51% as of Sept. 30. The company reported a tangible equity to assets ratio of 15.1% as of Sept. 30.

Five out of seven analysts covering Capital Federal Financial rate the shares a buy, while the remaining two analysts have neutral ratings.

Capital Federal is sitting on a boatload of capital, with but has an expensive leverage strategy of borrowing from the Federal Home Loan Bank and holding a rather large securities portfolio.

With the shares trading below book, the return of capital should provide support for the shares and a decent return for investors for the time being. As far as overall performance goes, with such a narrow margin and a shrinking loan book, any operating improvement will be icing on the cake.

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