CLEVELAND, Jan. 30, 2013 (GLOBE NEWSWIRE) -- TFS Financial Corporation (Nasdaq:TFSL) (the "Company"), the holding company for Third Federal Savings and Loan Association of Cleveland (the "Association"), today announced results for the three months ended December 31, 2012.
The Company reported net income of $11.2 million for the quarter ended December 31, 2012, compared to net income of $8.5 million for the quarter ended December 31, 2011. The increase in net income for the quarter ended December 31, 2012 is largely the result of increases in net interest income and net gain on the sale of loans, partially offset by a higher provision for loan losses.
"We are pleased with the improvement in earnings this quarter. Indicators point to a stronger housing market and a growing economy in our primary regions. We will continue to offer competitive first and second mortgages and actively hire additional associates where needed," said Chairman and CEO Marc A. Stefanski. "We are even more encouraged by the termination of the Association's Memorandum of Understanding (MOU). We are actively working through the issues with our regulator at the holding company level in order to provide additional value to our stockholders through our long term three-prong approach to managing capital - growth, buybacks and dividends."
"We are optimistic about 2013. We continue to add new customers via our refinance products and are actively managing our funding costs so that we maintain our margin. We remain committed to our mission of helping people achieve the dream of homeownership while creating value for our communities, our customers, and our stockholders," he further said.
Lower interest rates on deposits and borrowed funds caused net interest income to increase $4.1 million, or 6%, to $68.4 million for the quarter ended December 31, 2012 from $64.3 million for the quarter ended December 31, 2011. Low interest rates continue to decrease the yield on interest-earning assets and to a greater extent, the rate paid on deposits and borrowed funds. As a result, the interest rate spread has improved from the prior year. The interest rate spread for the quarter ended December 31, 2012 was 2.24% compared to 2.07% last year. The net interest margin for the quarter ended December 31, 2012 was 2.47% compared to 2.40% last year.
The Company recorded a provision for loan losses of $18.0 million for the three months ended December 31, 2012 compared to $15.0 million for the three months ended December 31, 2011. The Company reported $13.3 million of net loan charge-offs for the three months ended December 31, 2012 compared to $75.1 million for the three months ended December 31, 2011. Of the $13.3 million of net charge-offs, $5.6 million occurred in the equity loans and lines of credit portfolio, $4.3 million occurred in the residential, non-Home Today portfolio and $3.4 million occurred in the Home Today portfolio. The Home Today portfolio, which has had minimal new originations since 2009, is an affordable housing program targeted toward low and moderate income home buyers, which totaled $201.6 million at December 31, 2012 and $208.3 million at September 30, 2012. Net charge-offs of $75.1 million for the quarter ended December 31, 2011 included the impact of charging off, during that quarter, the Specific Valuation Allowance (SVA), which was $55.5 million at September 30, 2011. The allowance for loan losses was $105.2 million, or 1.06% of total loans receivable, at December 31, 2012, compared to $100.5 million, or 0.97% of total loans receivable, at September 30, 2012.
Non-accrual loans decreased $2.9 million to $179.6 million, or 1.81% of total loans, at December 31, 2012 from $182.6 million, or 1.77% of total loans, at September 30, 2012. The $2.9 million decrease in non-accrual loans for the quarter ended December 31, 2012 consisted of a $3.8 million decrease in the residential, non-Home Today portfolio; a $0.1 million increase in the residential, Home Today portfolio; and a $0.8 million increase in the equity loans and lines of credit portfolio.
Total loan delinquencies decreased $11.3 million to $161.2 million, or 1.61% of total loans receivable, at December 31, 2012 from $172.5 million, or 1.66% of total loans receivable, at September 30, 2012.
Total troubled debt restructurings decreased $7.4 million at December 31, 2012, to $214.0 million from $221.4 million at September 30, 2012. Of the $214.0 million of troubled debt restructurings recorded at December 31, 2012, $79.1 million was in the Home Today portfolio, $114.8 million was in the residential, non-Home Today portfolio and $19.4 million was in the equity loans and lines of credit portfolio. The portion of total troubled debt restructurings included as part of non-accrual loans was $87.5 million at December 31, 2012 and $86.9 million at September 30, 2012.
Total assets decreased by $138.5 million, or 1%, to $11.38 billion at December 31, 2012 from $11.52 billion at September 30, 2012. This change was mainly the result of the total of loan sales and principal repayments exceeding new loan origination levels, partially offset by increases in cash and investment securities.
The combination of cash and cash equivalents and investment securities increased $54.7 million, or 8%, to $784.4 million at December 31, 2012 from $729.7 million at September 30, 2012, to maintain liquidity levels.
The combination of loans held for investment, net and mortgage loans held for sale decreased $184.0 million, or 2%, to $10.17 billion at December 31, 2012 from $10.35 billion at September 30, 2012. During the quarter ended December 31, 2012, loan sales of $77.2 million were completed, consisting of $18.9 million of fixed rate loans that qualified under Fannie Mae's Home Affordable Refinance Program (HARP II) and $58.3 million of fixed rate non-agency whole loans. Net gain on the sale of these loans was $3.0 million. There were no loan sales during the quarter ended December 31, 2011. Residential non-Home Today mortgage loans, including those held for sale, decreased $93.9 million during the quarter ended December 31, 2012, while the equity loans and lines of credit portfolio decreased $77.1 million. First mortgage loan originations were $447.5 million for the quarter ended December 31, 2012, of which $236.8 million were adjustable rate mortgages, representing approximately 53% of all residential mortgage originations, compared to 58% for the same quarter last year. Adjustable rate mortgages originated under the Smart Rate ARM program since July, 2010 have helped to offset future interest rate risk exposure. Loans under the program have mainly either 15 or 30 year terms, with the initial interest rate fixed for either the first three or five years and adjusting annually thereafter, subject to various caps. Most loans originated under the program have 30 year terms with interest rates fixed for five years. The total principal balance of all adjustable rate first mortgage loans was $3.04 billion, or 37% of all first mortgage residential loans, at December 31, 2012. We continue to originate additional HARP II eligible loans for sale and to evaluate potential non-agency, whole loan sales of a pool of our high credit quality, first mortgage loans held for sale, which together, had a balance of $324.3 million at December 31, 2012.
Deposits decreased $176.9 million, or 2%, to $8.80 billion at December 31, 2012 from $8.98 billion at September 30, 2012. The decrease in deposits was the result of a $31.7 million increase in our savings accounts, a $36.3 million increase in our checking accounts, and a $244.4 million decrease in our certificates of deposit ("CD") for the quarter ended December 31, 2012. To manage our cost of funds, maturing, higher rate CDs were replaced by other lower rate savings products or borrowed funds from the FHLB, as needed.
Borrowed funds decreased $20.2 million, to $468.0 million at December 31, 2012 from $488.2 million at September 30, 2012. This decrease reflects lower overnight advances from the FHLB as a combination of loan sales and reduced loan growth led to decreased cash demands during the quarter.
Accrued expenses and other liabilities increased $44.3 million, or 96%, to $90.6 million at December 31, 2012 from $46.3 million at September 30, 2012. This change primarily reflects the in-transit status of $44.9 million of real estate tax payments that have been collected from borrowers and are being remitted to various taxing agencies.
Total shareholders' equity increased $13.2 million, or 1%, to $1.82 billion at December 31, 2012 from $1.81 billion at September 30, 2012. Activity reflects $11.2 million of net income in the current fiscal year combined with adjustments related to our stock compensation plan and ESOP.
At December 31, 2012, the Association was "well capitalized" for regulatory capital purposes, as its tier 1 risk based capital ratio was 21.54% and its total risk-based capital was 22.79%, both of which substantially exceed the amounts required for the Association to be considered well capitalized.
The Company will host a conference call to discuss its operating results for the year ended December 31, 2012 at 10:00 a.m. (ET) on January 31, 2013. The toll-free dial-in number is 866-952-1908, Conference ID TFSLQ113. A telephone replay will be available beginning at 2:00 p.m. (ET) on January 31, 2013 by dialing 800-677-6124. The conference call will be simultaneously webcast on the Company's website www.thirdfederal.com under the Investor Relations link under the "About Us" tab, and will be archived for 30 days after the event, beginning February 1, 2013. The slides for the conference call will be filed with the SEC under a separate Form 8-K and will also be available on the Company's website.
Forward Looking Statements
This report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:
These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
The TFS Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3622
|TFS FINANCIAL CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF CONDITION (unaudited)|
|(In thousands, except share data)|
|December 31, |
|September 30, 2012|
|Cash and due from banks||$ 46,795||$ 38,914|
|Other interest-earning cash equivalents||286,759||269,348|
|Cash and cash equivalents||333,554||308,262|
|Available for sale (amortized cost $447,959 and $417,416, respectively)||450,880||421,430|
|Mortgage loans held for sale, at lower of cost or market ($3,107 measured at fair value, September 30, 2012)||324,322||124,528|
|Loans held for investment, net:|
|Deferred loan fees, net||(18,128)||(18,561)|
|Allowance for loan losses||(105,201)||(100,464)|
|Mortgage loan servicing assets, net||17,787||19,613|
|Federal Home Loan Bank stock, at cost||35,620||35,620|
|Real estate owned||18,605||19,647|
|Premises, equipment, and software, net||60,915||61,150|
|Accrued interest receivable||33,360||34,887|
|Bank owned life insurance contracts||178,882||177,279|
|TOTAL ASSETS||$ 11,379,628||$ 11,518,125|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Deposits||$ 8,804,495||$ 8,981,419|
|Borrowers' advances for insurance and taxes||67,422||67,864|
|Principal, interest, and related escrow owed on loans serviced||129,036||127,539|
|Accrued expenses and other liabilities||90,631||46,262|
|Commitments and contingent liabilities|
|Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding||—||—|
|Common stock, $0.01 par value, 700,000,000 shares authorized; 332,318,750 shares issued; 309,035,125 and 309,009,393 outstanding at December 31, 2012 and September 30, 2012, respectively||3,323||3,323|
|Treasury stock, at cost; 23,283,625 and 23,309,357 shares at December 31, 2012 and September 30, 2012, respectively||(280,622)||(280,937)|
|Unallocated ESOP shares||(73,668)||(74,751)|
|Retained earnings—substantially restricted||484,307||473,247|
|Accumulated other comprehensive loss||(6,536)||(5,916)|
|Total shareholders' equity||1,820,044||1,806,850|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$ 11,379,628||$ 11,518,125|
|TFS Financial Corporation and Subsidiaries|
|CONSOLIDATED STATEMENTS OF INCOME (unaudited)|
|(In thousands, except share and per share data) |
|For the Three Months Ended |
|Loans, including fees||$ 98,689||$ 103,207|
|Investment securities available for sale||1,113||37|
|Investment securities held to maturity||—||1,734|
|Other interest and dividend earning assets||586||557|
|Total interest and dividend income||100,388||105,535|
|Total interest expense||31,972||41,280|
|NET INTEREST INCOME||68,416||64,255|
|PROVISION FOR LOAN LOSSES||18,000||15,000|
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES||50,416||49,255|
|Fees and service charges, net of amortization||2,303||2,813|
|Net gain on the sale of loans||3,022||—|
Increase in and death benefits from bank owned life |
|Total non-interest income||8,247||5,709|
|Salaries and employee benefits||20,603||20,385|
|Office property, equipment and software||5,021||4,998|
|Federal insurance premium and assessments||3,714||3,877|
|State franchise tax||1,663||989|
|Real estate owned expense, net||1,165||2,335|
|Appraisal and other loan review expense||683||990|
|Other operating expenses||6,560||6,528|
|Total non-interest expense||42,534||42,479|
|INCOME BEFORE INCOME TAXES||16,129||12,485|
|INCOME TAX EXPENSE||4,976||4,026|
|NET INCOME||$ 11,153||$ 8,459|
|Earnings per share—basic and diluted||$ 0.04||$ 0.03|
|Weighted average shares outstanding|
|TFS FINANCIAL CORPORATION AND SUBSIDIARIES|
|AVERAGE BALANCES AND YIELDS (unaudited)|
|Three Months Ended December 31, 2012||Three Months Ended December 31, 2011|
|(Dollars in thousands)|
|Other interest-bearing cash equivalents||$ 231,792||$ 161||0.28%||$ 291,160||$ 198||0.27%|
|Federal Home Loan Bank stock||35,620||425||4.77%||35,620||359||4.03%|
|Total interest-earning assets||11,092,956||100,388||3.62%||10,714,764||105,535||3.94%|
|Total assets||$ 11,376,727||$ 10,964,393|
|NOW accounts||$ 1,009,467||$ 705||0.28%||$ 970,870||$ 707||0.29%|
|Certificates of deposit||6,056,119||28,748||1.90%||5,989,928||37,845||2.53%|
|Total interest-bearing liabilities||9,276,689||31,972||1.38%||8,835,461||41,280||1.87%|
|Total liabilities and stockholders' equity||$ 11,376,727||$ 10,964,393|
|Net interest income||$ 68,416||$ 64,255|
|Interest rate spread (2)||2.24%||2.07%|
|Net interest-earning assets (3)||$ 1,816,267||$ 1,879,303|
|Net interest margin (4)||2.47% (1)||2.40% (1)|
|Average interest-earning assets to average interest-bearing liabilities||119.58%||121.27%|
|(2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.|
|(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.|
|(4) Net interest margin represents net interest income divided by total interest-earning assets.|
CONTACT: Jennifer Rosa (216) 429-5037