April 25, 2013 at 16:07 PM EDT
TFS Financial Corporation Announces Fiscal Quarter Ended March 31, 2013 Financial Results

CLEVELAND, Ohio, April 25, 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 and six month periods ended March 31, 2013.

The Company reported net income of $12.8 million for the three months ended March 31, 2013, compared to net income of $1.0 million for the three months ended March 31, 2012. The increase in net income is largely the result of an increase in net interest income and a lower provision for loan losses, partially offset by an increase in non-interest expenses. Net income of $23.9 million was reported for the six months ended March 31, 2013, compared to net income of $9.5 million for the six months ended March 31, 2012. The increase in net income for the six months is largely the result of increases in net interest income and non-interest income and a lower provision for loan losses, partially offset by an increase in non-interest expenses.

"The trends we are seeing in the housing market fuel my optimism," said Chairman and CEO Marc A. Stefanski. "In our Ohio market, where we make most of our loans, home sales were up 10 percent in February, and already 14 percent for the year.  That, coupled with our continued decline in delinquencies and our growth in new markets, gives me even more reason to be positive about our results from this quarter.  As we celebrate our 75th anniversary, we remain true to our commitment to our customers, associates, communities and our stockholders."

Lower interest rates on deposits, particularly on certificates of deposit, caused net interest income to increase $2.1 million, or 3%, to $67.9 million for the three months ended March 31, 2013 from $65.8 million for the three months ended March 31, 2012. Net interest income increased $6.3 million, or 5%, to $136.3 million for six months ended March 31, 2013 from $130.0 million for the six months ended March 31, 2012. Low interest rates continue to decrease the yield on interest-earning assets and to a greater extent, the rate paid on deposits. As a result, the interest rate spread has improved from the prior year. The interest rate spread increased 13 basis points in the current quarter to 2.28% compared to 2.15% in the same quarter last year. The interest rate spread for the six months ended March 31, 2013 was 2.26% compared to 2.11% in the six month period last year. The net interest margin increased six basis points in the current quarter to 2.48% compared to 2.42% in the same quarter last year. The net interest margin for the six months ended March 31, 2013 was 2.48% compared to 2.41% in the six month period last year.

The Company recorded a provision for loan losses of $10.0 million for the three months ended March 31, 2013 compared to $27.0 million for the three months ended March 31, 2012. The Company reported $14.0 million of net loan charge-offs for the three months ended March 31, 2013 compared to $22.6 million for the three months ended March 31, 2012. Of the $14.0 million of net charge-offs in the current quarter, $5.2 million occurred in the equity loans and lines of credit portfolio, $5.0 million occurred in the residential, non-Home Today portfolio and $3.8 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 $193.2 million at March 31, 2013 and $208.3 million at September 30, 2012. The Company recorded a provision for loan losses of $28.0 million for the six months ended March 31, 2013 compared to $42.0 million for the six months ended March 31, 2012. The Company reported $27.2 million of net loan charge-offs for the six months ended March 31, 2013 compared to $97.7 million for the six months ended March 31, 2012. Of the $27.2 million of net charge-offs for the six months ended March 31, 2013, $10.7 million occurred in the equity loans and lines of credit portfolio, $9.3 million occurred in the residential, non-Home Today portfolio and $7.2 million occurred in the Home Today portfolio. Net charge-offs of $97.7 million for the six months ended March 31, 2012 included the impact of charging off, during that period, the Specific Valuation Allowance (SVA), which was $55.5 million at September 30, 2011. The allowance for loan losses was $101.2 million, or 1.02% of total loans receivable, at March 31, 2013, compared to $100.5 million, or 0.97% of total loans receivable, at September 30, 2012. 

Non-accrual loans decreased $16.6 million to $166.0 million, or 1.67% of total loans, at March 31, 2013 from $182.6 million, or 1.77% of total loans, at September 30, 2012. The $16.6 million decrease in non-accrual loans for the six months ended March 31, 2013, consisted of a $7.5 million decrease in the residential, non-Home Today portfolio; a $4.0 million decrease in the residential, Home Today portfolio; a $4.9 million decrease in the equity loans and lines of credit portfolio; and a $0.2 million decrease in construction loans.

Total loan delinquencies decreased $27.6 million to $144.9 million, or 1.45% of total loans receivable, at March 31, 2013 from $172.5 million, or 1.66% of total loans receivable, at September 30, 2012.

Total troubled debt restructurings decreased $14.1 million to $207.3 million at March 31, 2013 from $221.4 million at September 30, 2012. Of the $207.3 million of troubled debt restructurings recorded at March 31, 2013, $74.9 million was in the Home Today portfolio, $112.6 million was in the residential, non-Home Today portfolio and $19.1 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 $82.6 million at March 31, 2013 and $86.9 million at September 30, 2012.

Total assets decreased $396.4 million, or 3%, to $11.12 billion at March 31, 2013 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, and a decrease in cash and cash equivalents, partially offset by an increase in investment securities.

The combination of cash and cash equivalents and investment securities increased $11.3 million, or 2%, to $741.0 million at March 31, 2013 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 $401.4 million, or 4%, to $9.95 billion at March 31, 2013 from $10.35 billion at September 30, 2012. During the six months ended March 31, 2013, loan sales of $222.2 million were completed, consisting of $35.8 million of fixed rate loans that qualified under Fannie Mae's Home Affordable Refinance Program (HARP II), $58.3 million of fixed rate non-agency whole loans and $128.1 million of variable rate non-agency whole loans. Net gain on the sale of these loans was $4.3 million. There were no loan sales during the six months ended March 31, 2012. Residential non-Home Today mortgage loans, including those held for sale, decreased $227.3 million during the six months ended March 31, 2013, while the equity loans and lines of credit portfolio decreased by $153.7 million. First mortgage loan originations were $887.5 million for the six months ended March 31, 2013, of which $451.0 million were adjustable rate mortgages, representing approximately 51% of all residential mortgage originations, compared to 58% for the six months ended March 31, 2012. Approximately 47% of the fixed rate originations for the six months ended March 31, 2013 were 10 year fixed rate loans. 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 been 30 year terms with interest rates fixed for five years. The total principal balance of all adjustable rate first mortgage loans was $3.00 billion, or 37% of all first mortgage residential loans, at March 31, 2013. 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 $96.9 million at March 31, 2013.

Deposits decreased $224.1 million, or 2%, to $8.76 billion at March 31, 2013 from $8.98 billion at September 30, 2012. The decrease in deposits was the net result of a $34.9 million increase in our savings accounts, a $46.1 million increase in our checking accounts, and a $304.8 million decrease in our certificates of deposit ("CD") for the six months ended March 31, 2013. 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 $172.3 million, to $315.9 million at March 31, 2013 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 production led to decreased cash demands during the period.

Total shareholders' equity increased $28.5 million, or 2%, to $1.84 billion at March 31, 2013 from $1.81 billion at September 30, 2012. Activity reflects $23.9 million of net income in the current fiscal year to date combined with adjustments related to our stock compensation plan and ESOP.

At March 31, 2013, the Association was "well capitalized" for regulatory capital purposes, as its tier 1 risk based capital ratio was 22.26% and its total risk-based capital was 23.52%, 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 three and six month periods ending March 31, 2013 at 10:00 a.m. (ET) on April 26, 2013. The toll-free dial-in number is 866-952-1908, Conference ID TFSLQ213. A telephone replay will be available beginning at 2:00 p.m. (ET) on April 26, 2013 by dialing 800-695-2533. 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 April 29, 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:

  • statements of our goals, intentions and expectations;
  • statements regarding our business plans and prospects and growth and operating strategies;
  • statements concerning trends in our provision for loan losses and charge-offs;
  • statements regarding the asset quality of our loan and investment portfolios; and
  • estimates of our risks and future costs and benefits.

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:

  • significantly increased competition among depository and other financial institutions;
  • inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;
  • general economic conditions, either nationally or in our market areas, including employment prospects and conditions that are worse than expected;
  • decreased demand for our products and services and lower revenue and earnings because of a recession or other events;
  • adverse changes and volatility in the securities markets;
  • adverse changes and volatility in credit markets;
  • legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings and Loan Association of Cleveland, MHC to waive dividends;
  • our ability to enter new markets successfully and take advantage of growth opportunities, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any;
  • changes in consumer spending, borrowing and savings habits;
  • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board;
  • future adverse developments concerning Fannie Mae or Freddie Mac;
  • changes in monetary and fiscal policy of the U.S. Government, including policies of the U.S. Treasury or the Federal Reserve Board and changes in the level of government support of housing finance;
  • changes in policy and/or assessment rates of taxing authorities that adversely affect us;
  • the timing and the amount of revenue that we may recognize;
  • changes in expense trends (including, but not limited to, trends affecting non-performing assets, charge-offs and provisions for loan losses);
  • the impact of the continuing governmental effort to restructure the U.S. financial and regulatory system;
  • inability of third-party providers to perform their obligations to us;
  • adverse changes and volatility in real estate markets;
  • a slowing or failure of the moderate economic recovery;
  • the extensive reforms enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), which will continue to impact us;
  • the adoption of implementing regulations by a number of different regulatory bodies under the Dodd-Frank Act, and uncertainty regarding the exact nature, extent and timing of such regulations and the impact they will have on us;
  • the continuing impact of coming under the jurisdiction of new federal regulators;
  • changes in our organization, or compensation and benefit plans;
  • the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and their impact on the credit quality of our loans and other assets; and
  • the ability of the U.S. Federal government to manage federal debt limits.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
(In thousands, except share data)
March 31,September 30, 
20132012
ASSETS
Cash and due from banks  $ 31,982  $ 38,914
Other interest-earning cash equivalents 252,164 269,348
Cash and cash equivalents 284,146 308,262
Investment securities:
Available for sale (amortized cost $454,297 and $417,416, respectively) 456,888 421,430
Mortgage loans held for sale, at lower of cost or market ($3,017 measured at fair value, September 30, 2012) 96,882 124,528
Loans held for investment, net:
Mortgage loans 9,965,436 10,339,402
Other loans 4,276 4,612
Deferred loan fees, net (17,241) (18,561)
Allowance for loan losses (101,217) (100,464)
Loans, net 9,851,254 10,224,989
Mortgage loan servicing assets, net 16,390 19,613
Federal Home Loan Bank stock, at cost 35,620 35,620
Real estate owned 19,868 19,647
Premises, equipment, and software, net 59,596 61,150
Accrued interest receivable 32,037 34,887
Bank owned life insurance contracts 180,460 177,279
Other assets 88,620 90,720
TOTAL ASSETS  $ 11,121,761  $ 11,518,125
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits  $ 8,757,282  $ 8,981,419
Borrowed funds 315,919 488,191
Borrowers' advances for insurance and taxes 60,753 67,864
Principal, interest, and related escrow owed on loans serviced 114,889 127,539
Accrued expenses and other liabilities 37,534 46,262
Total liabilities 9,286,377 9,711,275
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; 309,115,625 and 309,009,393 outstanding at March 31, 2013 and September 30, 2012, respectively 3,323 3,323
Paid-in capital 1,693,821 1,691,884
Treasury stock, at cost; 23,203,125 and 23,309,357 shares at March 31, 2013 and September 30, 2012, respectively (279,629) (280,937)
Unallocated ESOP shares (72,584) (74,751)
Retained earnings—substantially restricted 497,113 473,247
Accumulated other comprehensive loss (6,660) (5,916)
Total shareholders' equity 1,835,384 1,806,850
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $ 11,121,761  $ 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
March 31,
For the Six Months Ended
March 31,
2013201220132012
INTEREST INCOME:
Loans, including fees  $ 95,241  $ 102,696  $ 193,930  $ 205,903
Investment securities available for sale 1,079 33 2,192 70
Investment securities held to maturity 1,538 3,272
Other interest and dividend earning assets 515 551 1,101 1,108
Total interest and dividend income 96,835 104,818 197,223 210,353
INTEREST EXPENSE:
Deposits 28,030 38,390 59,165 79,096
Borrowed funds 875 643 1,712 1,217
Total interest expense 28,905 39,033 60,877 80,313
NET INTEREST INCOME 67,930 65,785 136,346 130,040
PROVISION FOR LOAN LOSSES 10,000 27,000 28,000 42,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 57,930 38,785 108,346 88,040
NON-INTEREST INCOME:
Fees and service charges, net of amortization 2,146 3,284 4,449 6,097
Net gain on the sale of loans 1,257 4,279
Increase in and death benefits from bank owned life insurance contracts 1,577 1,610 3,182 3,222
Other 1,126 1,517 2,443 2,801
Total non-interest income 6,106 6,411 14,353 12,120
NON-INTEREST EXPENSE:
Salaries and employee benefits 21,824 21,049 42,427 41,434
Marketing services 3,127 2,377 6,252 4,754
Office property, equipment and software 5,293 5,073 10,314 10,071
Federal insurance premium and assessments 3,243 3,512 6,957 7,389
State franchise tax 1,749 1,716 3,412 2,705
Real estate owned expense, net 1,516 1,672 2,681 4,007
Appraisal and other loan review expense 1,102 1,163 1,785 2,153
Other operating expenses 7,375 6,758 13,935 13,286
Total non-interest expense 45,229 43,320 87,763 85,799
INCOME BEFORE INCOME TAXES 18,807 1,876 34,936 14,361
INCOME TAX EXPENSE 6,017 854 10,993 4,880
NET INCOME  $ 12,790  $ 1,022  $ 23,943  $ 9,481
Earnings per share—basic and diluted  $ 0.04  —   $ 0.08  $ 0.03
Weighted average shares outstanding
Basic 301,753,966 301,153,080 301,664,171 301,098,610
Diluted 302,581,395 301,706,570 302,381,164 301,547,664
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended March 31, 2013 Three Months Ended March 31, 2012
Average Interest Yield/ Average Interest Yield/
Balance Income/ Cost (1) Balance Income/ Cost (1)
Expense Expense
(Dollars in thousands)
Interest-earning assets:
Other interest-bearing cash equivalents  $ 234,237  $ 134 0.23%  $ 269,830  $ 147 0.22%
Investment securities 9,303 9 0.39% 10,361 9 0.35%
Mortgage-backed securities 439,975 1,070 0.97% 359,179 1,562 1.74%
Loans 10,216,741 95,241 3.73% 10,200,004 102,696 4.03%
Federal Home Loan Bank stock 35,620 381 4.28% 35,620 404 4.54%
Total interest-earning assets 10,935,876 96,835 3.54% 10,874,994 104,818 3.86%
Noninterest-earning assets 286,432 295,604
Total assets 11,222,308 11,170,598
Interest-bearing liabilities:
NOW accounts  $ 1,022,074  $ 602 0.24%  $ 980,248  $ 700 0.29%
Savings accounts 1,809,665 1,485 0.33% 1,762,811 1,933 0.44%
Certificates of deposit 5,922,765 25,943 1.75% 5,932,175 35,757 2.41%
Borrowed funds 417,843 875 0.84% 441,034 643 0.58%
Total interest-bearing liabilities 9,172,347 28,905 1.26% 9,116,268 39,033 1.71%
Noninterest-bearing liabilities 223,303 253,231
Total liabilities 9,395,650 9,369,499
Shareholders' equity 1,826,658 1,801,099
Total liabilities and shareholders' equity  $ 11,222,308  $ 11,170,598
Net interest income  $ 67,930  $ 65,785
Interest rate spread (2) 2.28% 2.15%
Net interest-earning assets (3)  $ 1,763,529  $ 1,758,726
Net interest margin (4) 2.48% (1) 2.42% (1)  
Average interest-earning assets to average interest-bearing liabilities 119.23% 119.29%
(1)  Annualized
(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.
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Six Months Ended March 31, 2013 Six Months Ended March 31, 2012
Average Interest Yield/ Average Interest Yield/
Balance Income/ Cost Balance Income/ Cost
Expense Expense
(Dollars in thousands)
Interest-earning assets:
Other interest-bearing cash equivalents  $ 233,015  $ 295 0.25%  $ 280,495  $ 345 0.25%
Investment securities 9,502 18 0.38% 10,455 19 0.36%
Mortgage-backed securities 433,580 2,174 1.00% 366,222 3,323 1.81%
Loans (2) 10,302,699 193,930 3.76% 10,102,086 205,903 4.08%
 Federal Home Loan Bank stock 35,620 806 4.53% 35,620 763 4.28%
Total interest-earning assets 11,014,416 197,223 3.58% 10,794,878 210,353 3.90%
Noninterest-earning assets 285,911 272,617
Total assets  $ 11,300,327  $ 11,067,495
Interest-bearing liabilities:
NOW accounts  $ 1,015,770  $ 1,307 0.26%  $ 975,559  $ 1,407 0.29%
Savings accounts 1,801,513 3,167 0.35% 1,738,801 4,088 0.47%
Certificates of deposit 5,989,442 54,691 1.83% 5,961,051 73,601 2.47%
Borrowed funds 417,793 1,712 0.82% 300,454 1,217 0.81%
Total interest-bearing liabilities 9,224,518 60,877 1.32% 8,975,865 80,313 1.79%
Noninterest-bearing liabilities 256,052 298,480
Total liabilities 9,480,570 9,274,345
Stockholders' equity 1,819,757 1,793,150
Total liabilities and stockholders' equity  $ 11,300,327  $ 11,067,495
Net interest income  $ 136,346  $ 130,040
Interest rate spread (2) 2.26% 2.11%
Net interest-earning assets (3)  $ 1,789,898  $ 1,819,013
Net interest margin (4) 2.48 (1) 2.41% (1)
Average interest-earning assets to average interest-bearing liabilities 119.40% 120.27%
(1)  Annualized
(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
Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here