CLEVELAND, Aug. 6, 2008 (PRIME NEWSWIRE) -- TFS Financial Corporation (Nasdaq:TFSL) (the "Company"), the holding company for Third Federal Savings and Loan Association of Cleveland, today announced results for the three and nine month periods ended June 30, 2008.
The Company reported net income of $6.8 million for the three months ended June 30, 2008, compared to net loss of $17.3 million for the three months ended June 30, 2007. Net income of $40.4 million was reported for the nine months ended June 30, 2008, compared to net income of $10.6 million for the nine months ended June 30, 2007. The 2007 results were impacted by a non-recurring $55 million pre-tax charitable contribution expense to establish the Third Federal Foundation.
Interest income decreased $8.6 million, or 6%, to $131.6 million for the three months ended June 30, 2008 from $140.1 million for the three months ended June 30, 2007. The decrease in interest income resulted primarily from a decrease in the interest received on federal funds partially offset by increases in interest income from mortgage-backed securities and loans.
Interest expense decreased $12.1 million, or 14%, to $75.3 million for the three months ended June 30, 2008 from $87.3 million for the three months ended June 30, 2007. The change resulted primarily from a decrease in interest expense on NOW accounts and certificate of deposit accounts and was partially offset by an increase in interest expense on savings accounts.
Increasing unemployment levels and rising fuel and food prices are challenging our borrowers' ability to repay their loans at a time when deteriorating housing prices, in part as a consequence of the sub-prime mortgage market, make it difficult to sell their homes. This limits the ability of many borrowers to self cure a delinquency. Based on our evaluation of the above factors, including an expanded loan level evaluation of our equity lines of credit which were delinquent 90 days or more, we recorded a provision for loan losses of $18.0 million for the three months ended June 30, 2008 and $2.1 million for the three months ended June 30, 2007. The provisions exceeded net chargeoffs of $3.9 million and $1.1 million for the three months ended June 30, 2008 and 2007, respectively. The Company's provision for loan losses was $25.5 million for the nine months ended June 30, 2008 and $6.4 million for the nine months ended June 30, 2007. The provisions exceeded net chargeoffs of $8.4 million and $3.2 million for the nine months ended June 30, 2008 and 2007, respectively. The allowance for loan losses was $42.2 million, or 0.47% of total loans receivable at June 30, 2008, compared to $25.1 million, or 0.31% of total loans receivable at September 30, 2007. We increased the allowance for loan losses to address the increased risk related to an increase in non-performing loans and in response to the results of our expanded evaluation of equity lines of credit, delinquent 90 days or more as of June 30, 2008. Nonperforming loans increased by $35.9 million to $149.4 million, or 1.66% of total loans, at June 30, 2008 from $113.5 million, or 1.39% of total loans, at September 30, 2007. Of the $35.9 million increase in nonperforming loans for the nine months ended June 30, 2008, $19.8 million occurred in the equity loans and lines of credit portfolio and $13.1 million occurred in the residential, non-Home Today portfolio. As of June 30, 2008, the equity loans and lines of credit portfolio was $2.27 billion, compared to $1.87 billion, at September 30, 2007.
Non-interest income decreased $2.2 million, to $11.9 million for the three months ended June 30, 2008 from $14.2 million for the three months ended June 30, 2007. This decrease can be attributed to a $3.2 million gain recognized in 2007 in connection with the sale of a commercial office building by a subsidiary.
Non-interest expense decreased $49.3 million, to $39.3 million for the three months ended June 30, 2008 from $88.6 million for the three months ended June 30, 2007. The 2007 results were impacted by a non-recurring $55.0 million pre-tax charitable contribution expense to establish the Third Federal Foundation.
Total assets increased by $82.9 million to $10.36 billion at June 30, 2008 from $10.28 billion at September 30, 2007.
Cash and cash equivalents decreased $730.0 million, or 88%, to $99.7 million at June 30, 2008 from $829.7 million at September 30, 2007, as we continued to redeploy our liquid assets into investments and loan products that provide higher yields along with longer maturities.
Our net loans held for investment increased $831.9 million, or 10%, to $8.91 billion at June 30, 2008 from $8.07 billion at September 30, 2007.
Deposits decreased $40.9 million, or less than 1%, to $8.10 billion at June 30, 2008 from $8.14 billion at September 30, 2007. The decrease in deposits was the result of a $226.7 million decrease in our high-yield checking accounts along with a $173.2 million decrease in certificates of deposit, which were offset by a $369.0 million increase in high-yield savings accounts (a subcategory of our savings accounts), combined with modest declines in other deposit products for the nine-month period ended June 30, 2008.
Accrued expenses and other liabilities increased $97.9 million to $130.1 million at June 30, 2008 from $32.2 million at September 30, 2007. This reflects the in-transit status of $90.6 million of real estate tax payments that have been collected from borrowers and are being remitted to various taxing agencies.
Shareholders' equity decreased $31.2 million, to $1.95 billion at June 30, 2008 from $1.99 billion at September 30, 2007. This reflects $40.4 million of net income during the nine-month period reduced by $69.3 million of repurchases of outstanding common stock and $9.5 million in dividends paid on our shares of common stock (other than Third Federal Savings, MHC and unallocated ESOP shares) in the current fiscal year. Approximately 5.7 million shares were repurchased during the three months ended June 30, 2008 as part of a 15.8 million share repurchase program that began April 21, 2008.
The TFS Financial Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3622
Forward-Looking Statements
This press release 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 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, that are worse than expected; * adverse changes in the securities markets; * adverse changes and volatility in credit markets; * legislative or regulatory changes that adversely affect our business; * 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 and the Financial Accounting Standards Board; * inability of third-party providers to perform their obligations to us; and * changes in our organization, compensation and benefit plans.
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)
---------------------------------------------------------------------
June 30, September 30,
2008 2007
------------ ------------
ASSETS
Cash and due from banks $ 43,536 $ 45,666
Federal funds sold 2,500 598,400
Other interest-bearing cash
equivalents 53,699 185,649
------------ ------------
Cash and cash equivalents 99,735 829,715
------------ ------------
Investment securities:
Available for sale (amortized
cost $32,075 and $57,025,
respectively) 32,180 56,681
Held to maturity (fair value
$864,180 and $825,342,
respectively) 865,165 823,815
------------ ------------
Investment securities 897,345 880,496
------------ ------------
Mortgage loans held for sale, at
lower of cost or market 63,260 107,962
Loans held for investment, net:
Mortgage loans 8,954,654 8,103,300
Other loans 8,997 14,692
Deferred loan fees, net (15,817) (19,174)
Allowance for loan losses (42,239) (25,111)
------------ ------------
Loans held for investment, net 8,905,595 8,073,707
------------ ------------
Mortgage loan servicing rights,
net 42,032 41,064
Federal Home Loan Bank stock, at
cost 35,146 34,231
Real estate owned 13,091 9,903
Premises, equipment, and
software, net 68,471 69,669
Accrued interest receivable 44,515 48,364
Bank owned life insurance
contracts 149,413 144,498
Other assets 42,332 38,420
------------ ------------
TOTAL ASSETS $ 10,360,935 $ 10,278,029
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 8,100,362 $ 8,141,215
Borrowed funds 93,007 --
Borrowers' advances for insurance
and taxes 20,535 40,481
Principal, interest, and related
escrow owed on loans serviced 61,943 77,908
Accrued expenses and other
liabilities 130,093 32,224
------------ ------------
Total liabilities 8,405,940 8,291,828
------------ ------------
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;
326,635,750 and 332,318,750
outstanding at June 30, 2008 and
September 30, 2007, respectively 3,323 3,323
Paid-in capital 1,669,423 1,668,215
Treasury stock, at cost;
5,683,000 shares at June 30, 2008 (69,316) --
Unallocated ESOP shares (95,132) (100,597)
Retained earnings --
substantially restricted 452,466 421,503
Accumulated other comprehensive
loss (5,769) (6,243)
------------ ------------
Total shareholders' equity 1,954,995 1,986,201
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 10,360,935 $ 10,278,029
============ ============
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (unaudited)
(In thousands, except share and per share data)
---------------------------------------------------------------------
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
INTEREST AND
DIVIDEND INCOME:
Loans,
including
fees $ 118,645 $ 116,088 $ 363,713 $ 347,653
Investment
securities
available
for sale 388 624 1,448 1,984
Investment
securities
held to
maturity 10,471 7,235 33,436 12,623
Federal funds
sold 1,254 15,370 14,480 26,898
Other interest
earning
assets 806 797 3,047 3,209
----------- ----------- ----------- -----------
Total
interest
income 131,564 140,114 416,124 392,367
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 75,244 87,029 253,772 250,215
Federal Home
Loan Bank
advances 19 310 19 933
----------- ----------- ----------- -----------
Total
interest
expense 75,263 87,339 253,791 251,148
----------- ----------- ----------- -----------
NET INTEREST
INCOME 56,301 52,775 162,333 141,219
PROVISION FOR
LOAN LOSSES 18,000 2,100 25,500 6,350
----------- ----------- ----------- -----------
NET INTEREST
INCOME AFTER
PROVISION FOR
LOAN LOSSES 38,301 50,675 136,833 134,869
----------- ----------- ----------- -----------
NON-INTEREST INCOME
Fees and
service
charges 6,521 6,481 18,903 18,840
Net gain
(loss) on the
sale of loans 828 (630) 3,282 (995)
Increase in
and death
benefits
from bank
owned life
insurance
contracts 1,659 1,595 4,921 4,720
Net income on
private
equity
investments 1,158 1,293 3,173 4,470
Other 1,780 5,442 5,420 10,665
----------- ----------- ----------- -----------
Total
non-interest
income 11,946 14,181 35,699 37,700
----------- ----------- ----------- -----------
NON-INTEREST
EXPENSE:
Salaries and
employee
benefits 17,931 17,956 54,422 54,275
Marketing
services 3,525 3,353 10,578 10,055
Office
property,
equipment,
and software 4,932 5,018 13,891 14,393
Federal
insurance
premium 1,964 591 3,258 1,749
State
franchise tax 1,657 841 4,027 2,655
Contribution
to charitable
foundation -- 55,000 -- 55,000
Other
operating
expenses 9,322 5,833 23,274 16,763
----------- ----------- ----------- -----------
Total
non-interest
expense 39,331 88,592 109,450 154,890
----------- ----------- ----------- -----------
INCOME (LOSS)
BEFORE INCOME
TAXES 10,916 (23,736) 63,082 17,679
INCOME TAX
EXPENSE
(BENEFIT) 4,126 (6,479) 22,653 7,118
----------- ----------- ----------- -----------
NET INCOME
(LOSS) $ 6,790 $ (17,257) $ 40,429 $ 10,561
=========== =========== =========== ===========
Earnings (loss)
per share -
basic and
fully
diluted $ 0.02 $ (0.06) $ 0.13 $ 0.04
Weighted
average
shares
outstanding
- basic and
fully
diluted 320,510,396 301,108,648 321,795,514 251,782,304
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended Three Months Ended
June 30, 2008 June 30, 2007
--------------------------- --------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost(a) Balance Expense Cost(a)
----------- ------- ------ ---------- ------- ------
(Dollars in thousands)
Interest-
earning
assets:
Federal
funds
sold $ 231,237 $ 1,254 2.17% $1,173,324 $15,370 5.24%
Other
interest-
bearing
cash
equivalents 53,258 331 2.49% 17,754 242 5.45%
Investment
securities 28,987 222 3.06% 61,055 643 4.21%
Mortgage-
backed
securities 915,114 10,638 4.65% 528,748 7,216 5.46%
Loans 8,808,113 118,645 5.39% 7,698,883 116,088 6.03%
Federal Home
Loan Bank
stock 34,683 474 5.47% 34,231 555 6.49%
----------- ------- ------ ---------- ------- ------
Total
interest-
earning
assets 10,071,392 131,564 5.23% 9,513,995 140,114 5.89%
------- -------
Non-interest-
earning
assets 341,596 341,012
----------- ----------
Total assets $10,412,988 $9,855,007
=========== ==========
Interest-
bearing
liabilities:
NOW accounts $ 1,266,661 5,974 1.89% $1,616,065 16,472 4.08%
Savings &
subscription
proceeds 1,411,285 8,647 2.45% 919,609 6,277 2.73%
Certificates
of deposit 5,481,524 60,623 4.42% 5,402,340 64,280 4.76%
Borrowed
funds 3,570 19 2.13% 25,104 310 4.94%
----------- ------- ------ ---------- ------- ------
Total
interest-
bearing
liabilities 8,163,040 75,263 3.69% 7,963,118 87,339 4.39%
------- -------
Non-interest-
bearing
liabilities 235,368 85,000
----------- ----------
Total
liabilities 8,398,408 8,048,118
Shareholders'
equity 2,014,580 1,806,889
----------- ----------
Total
liabilities
and
shareholders'
equity $10,412,988 $ 9,855,007
=========== ===========
Net interest
income $56,301 $ 52,775
======= ========
Interest rate
spread (b) 1.54% 1.50%
====== ======
Net interest-
earning
assets (c) $ 1,908,352 $ 1,550,877
=========== ===========
Net interest
margin (d) 2.24%(a) 2.22%(a)
====== ======
Average
interest-
earning
assets to
average
interest-
bearing
liabilities 123.38% 119.48%
=========== ===========
(a) Annualized
(b) Interest rate spread represents the difference between the yield
on average interest-earning assets and the cost of average
interest-bearing liabilities.
(c) Net interest-earning assets represent total interest-earning
assets less total interest-bearing liabilities.
(d) Net interest margin represents net interest income divided by
total interest-earning assets.
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Nine Months Ended Nine Months Ended
June 30, 2008 June 30, 2007
--------------------------- --------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost(a) Balance Expense Cost(a)
----------- ------- ------ ---------- ------- ------
(Dollars in thousands)
Interest-
earning
assets:
Federal
funds sold $ 515,548 $14,480 3.74% $ 684,692 $26,898 5.24%
Other
interest-
bearing
cash
equivalents 53,294 1,522 3.81% 15,204 591 5.18%
Investment
securities 44,972 1,205 3.57% 52,027 1,548 3.97%
Mortgage-
backed
securities 892,649 33,679 5.03% 327,618 13,059 5.31%
Loans 8,526,432 363,713 5.69% 7,680,778 347,653 6.04%
Federal Home
Loan Bank
stock 34,383 1,525 5.91% 58,368 2,618 5.98%
----------- ------- ------ ---------- ------- ------
Total
interest-
earning
assets 10,067,278 416,124 5.51% 8,818,687 392,367 5.93%
------- -------
Non-interest-
earning
assets 347,824 335,880
----------- ----------
Total assets $10,415,102 $9,154,567
=========== ==========
Interest-
bearing
liabilities:
NOW accounts $ 1,323,877 25,847 2.60% $1,661,553 50,948 4.09%
Savings &
subscription
proceeds 1,258,262 29,856 3.16% 560,322 8,306 1.98%
Certificates
of deposit 5,608,577 198,069 4.71% 5,462,386 190,961 4.66%
Borrowed
funds 1,190 19 2.13% 25,104 933 4.96%
----------- ------- ------ ---------- ------- ------
Total
interest-
bearing
liabilities 8,191,906 253,791 4.13% 7,709,365 251,148 4.34%
------- -------
Non-interest-
bearing
liabilities 207,338 157,987
----------- ----------
Total
liabilities 8,399,244 7,867,352
Shareholders'
equity 2,015,858 1,287,215
----------- ----------
Total
liabilities
and
shareholders'
equity $10,415,102 $9,154,567
=========== ==========
Net interest
income $162,333 $141,219
======== ========
Interest rate
spread (b) 1.38% 1.59%
====== ======
Net interest-
earning
assets (c) $ 1,875,372 $1,109,322
=========== ==========
Net interest
margin (d) 2.15%(a) 2.14%(a)
====== ======
Average
interest-
earning
assets to
average
interest-
bearing
liabilities 122.89% 114.39%
----------- ----------
(a) Annualized
(b) Interest rate spread represents the difference between the yield
on average interest-earning assets and the cost of average
interest-bearing liabilities.
(c) Net interest-earning assets represent total interest-earning
assets less total interest-bearing liabilities.
(d) Net interest margin represents net interest income divided by
total interest-earning assets.