CLEVELAND, Aug. 5, 2009 (GLOBE 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, 2009.
The Company reported net income of $10.0 million for the three months ended June 30, 2009, compared to net income of $6.8 million for the three months ended June 30, 2008. The increase resulted mainly from non-interest income increasing due to gains on the sale of loans, offset by increasing non-interest expenses, mainly increased federal insurance premiums. Net income of $27.3 million was reported for the nine months ended June 30, 2009, compared to net income of $40.4 million for the nine months ended June 30, 2008. This change was attributable to increases in the provision for loan losses and non-interest expenses offset by increases in both net interest income and non-interest income in the current nine-month period.
Net interest income increased $2.1 million, or 4%, to $58.4 million for the three months ended June 30, 2009 from $56.3 million for the three months ended June 30, 2008. Interest rate spread increased 19 basis points to 1.73% for the three months ended June 30, 2009 from 1.54% for the three months ended June 30, 2008. Net interest income increased $11.6 million, or 7%, to $173.9 million for the nine months ended June 30, 2009 from $162.3 million for the nine months ended June 30, 2008. Interest rate spread increased 30 basis points to 1.68% for the nine months ended June 30, 2009 from 1.38% for the nine months ended June 30, 2008. The increase in net interest income in both periods resulted from a decrease in the interest paid on interest-bearing liabilities, partially offset by a decrease in interest received on interest-earning assets.
The Company recorded a provision for loan losses of $20.0 million for the three months ended June 30, 2009 and $18.0 million for the three months ended June 30, 2008. This compares to net charge-offs of $23.8 million and $3.9 million for the three months ended June 30, 2009 and 2008, respectively. The Company's provision for loan losses was $58.0 million for the nine months ended June 30, 2009 and $25.5 million for the nine months ended June 30, 2008. The provisions exceeded net charge-offs of $45.9 million and $8.4 million for the nine months ended June 30, 2009 and 2008, respectively. Of the $45.9 million of net charge-offs for the nine months ended June 30, 2009, $37.9 million occurred in the equity loans and lines of credit portfolio. The increased level of charge-offs in this portfolio is not unexpected. As increasing delinquencies in this portfolio have been resolved through pay-off, short sale or foreclosure, or management determines the collateral is not sufficient to satisfy the loan, uncollected balances have been charged against the allowance for loan losses previously provided. Loans continue to be evaluated as they become delinquent for potential loss and provisions recorded for our estimate of those losses. The allowance for loan losses was $55.9 million, or 0.59% of total loans receivable, at June 30, 2009, compared to $43.8 million, or 0.47% of total loans receivable, at September 30, 2008.
Nonperforming loans increased by $65.6 million to $238.4 million at June 30, 2009 from $172.9 million at September 30, 2008. Of the $65.6 million increase in non-performing loans for the nine months ended June 30, 2009, $40.5 million occurred in the residential, non-Home Today portfolio, $15.0 million occurred in the residential, Home Today portfolio and $5.3 million occurred in the equity loans and lines of credit portfolio. The increase in our residential, non-Home Today portfolio was general in nature and reflective of the progressive deterioration of general market conditions with specific negative implications in the housing markets of our primary geographic operating areas. As of June 30, 2009, the equity loans and lines of credit portfolio was $2.95 billion, compared to $2.49 billion, at September 30, 2008.
Non-interest income increased $9.6 million, or 80%, to $21.5 million for the three months ended June 30, 2009 from $11.9 million for the three months ended June 30, 2008. The increase primarily resulted from an $8.6 million increase in net gain on the sale of loans. Non-interest income increased $14.9 million, or 42%, to $50.6 million for the nine months ended June 30, 2009 from $35.7 million for the nine months ended June 30, 2008. The increase primarily resulted from a $25.6 million increase in net gain on the sale of loans, offset by a $4.2 million reduction of income (loss) on private equity investments and a $3.6 million reduction in fees and service charges.
Non-interest expense increased $6.5 million, or 17%, to $45.8 million for the three months ended June 30, 2009 from $39.3 million for the three months ended June 30, 2008. The increase primarily resulted from a $7.8 million increase in federal insurance premiums. Non-interest expense increased $17.3 million, or 16%, to $126.8 million for the nine months ended June 30, 2009 from $109.5 million for the nine months ended June 30, 2008. The increase primarily resulted from a $12.3 million increase in federal insurance premiums.
Total assets decreased by $3.3 million, or less than 1%, to $10.78 billion at June 30, 2009 from $10.79 billion at September 30, 2008. Although minimal, this change was the result of a decrease in investment securities offset by increases in cash and cash equivalents and in the loan portfolio.
Deposits increased $236.4 million, or 3%, to $8.50 billion at June 30, 2009 from $8.26 billion at September 30, 2008. The increase in deposits was primarily the result of a $368.7 million increase in certificates of deposit offset by $95.1 million and $39.8 million decreases in our high yield checking accounts and high yield savings accounts, respectively, for the nine-month period ended June 30, 2009.
Borrowed funds decreased $307.9 million, or 62%, to $190.2 million at June 30, 2009 from $498.0 million at September 30, 2008, mainly through the success of deposit gathering activities and the use of cash flows from maturing investments and loan sales.
Principal, interest and related escrow owed on loans serviced increased $151.0 million, or 187%, to $231.7 million at June 30, 2009 from $80.7 million at September 30, 2008, due to the timing of when payments have been collected from borrowers for loans serviced for other investors and when those funds are remitted to the investors and to the appropriate taxing agencies.
Shareholders' equity decreased $66.9 million, to $1.78 billion at June 30, 2009 from $1.84 billion at September 30, 2008. This reflects $27.3 million of net income during the nine-month period reduced by $14.5 million in dividends paid on our shares of common stock (other than the shares held by Third Federal Savings, MHC and unallocated ESOP shares) and $90.3 million of repurchases of outstanding common stock during the nine-month period. The remainder of the change reflects adjustments related to the allocation of shares of our common stock related to awards under the stock-based compensation plans and our employee stock ownership plan. A total of 410,850 shares were repurchased during the three months ended June 30, 2009, and a total of approximately 7.3 million shares have been repurchased during the nine months ended June 30, 2009. There are 2,889,150 shares remaining to be purchased under the Company's fourth repurchase program, which was approved March 12, 2009.
The TFS Financial Corporation logo is available at http://www.globenewswire.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; * decreased demand for our products and services and lower revenue and earnings because of a recession; * adverse changes and volatility 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, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board; * future adverse developments concerning Fannie Mae, Freddie Mac or the Federal Home Loan Bank; * changes in monetary and fiscal policy of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; * changes in policy and/or assessment rates of taxing authorities that adversely affect us; * changes in policy and/or assessment rates of the Federal Deposit Insurance Corporation; * inability of third-party providers to perform their obligations to us; * changes in our organization, compensation and benefit plans; and * the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of our loans and other assets.
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, Sept. 30,
2009 2008
----------- -----------
ASSETS
Cash and due from banks $ 42,701 $ 57,888
Other interest-bearing cash equivalents 130,079 74,491
----------- -----------
Cash and cash equivalents 172,780 132,379
----------- -----------
Investment securities:
Available for sale (amortized cost
$25,152 and $30,861, respectively) 25,611 31,102
Held to maturity (fair value $630,061
and $820,047, respectively) 619,570 817,750
----------- -----------
Total investment securities 645,181 848,852
----------- -----------
Mortgage loans held for sale (includes
$250,100 measured at fair value for the
period ended June 30, 2009) 263,168 200,670
Loans held for investment, net:
Mortgage loans 9,373,919 9,259,529
Other loans 7,425 7,599
Deferred loan fees, net (10,338) (14,596)
Allowance for loan losses (55,868) (43,796)
----------- -----------
Loans, net 9,315,138 9,208,736
----------- -----------
Mortgage loan servicing assets, net 36,603 41,526
Federal Home Loan Bank stock, at cost 35,620 35,620
Real estate owned 14,859 14,108
Premises, equipment, and software, net 66,504 68,112
Accrued interest receivable 38,813 46,371
Bank owned life insurance contracts 156,196 151,294
Other assets 38,278 38,783
----------- -----------
TOTAL ASSETS $10,783,140 $10,786,451
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 8,497,485 $ 8,261,101
Borrowed funds 190,158 498,028
Borrowers' advances for insurance
and taxes 21,974 48,439
Principal, interest, and related escrow
owed on loans serviced 231,683 80,675
Accrued expenses and other liabilities 65,096 54,556
----------- -----------
Total liabilities 9,006,396 8,942,799
----------- -----------
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;
308,957,900 and 316,233,550 outstanding
at June 30, 2009 and September 30, 2008,
respectively 3,323 3,323
Paid-in capital 1,678,141 1,672,953
Treasury stock, at cost; 23,360,850 shares
at June 30, 2009 and 16,085,200 shares
at September 30, 2008 (282,368) (192,662)
Unallocated ESOP shares (89,250) (93,545)
Retained earnings--substantially restricted 474,966 462,190
Accumulated other comprehensive loss (8,068) (8,607)
----------- -----------
Total shareholders' equity 1,776,744 1,843,652
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,783,140 $10,786,451
=========== ===========
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,
2009 2008 2009 2008
----------- ----------- ----------- -----------
INTEREST AND
DIVIDEND INCOME:
Loans,
including fees $ 110,863 $ 118,645 $ 347,955 $ 363,713
Investment
securities
available
for sale 176 388 644 1,448
Investment
securities
held to
maturity 6,374 10,471 23,256 33,436
Federal funds
sold 1 1,254 1 14,480
Other interest
and dividend
earning assets 456 806 1,312 3,047
----------- ----------- ----------- -----------
Total
interest and
dividend
income 117,870 131,564 373,168 416,124
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 59,032 75,244 197,165 253,772
Borrowed funds 485 19 2,102 19
----------- ----------- ----------- -----------
Total
interest
expense 59,517 75,263 199,267 253,791
----------- ----------- ----------- -----------
NET INTEREST
INCOME 58,353 56,301 173,901 162,333
PROVISION FOR
LOAN LOSSES 20,000 18,000 58,000 25,500
----------- ----------- ----------- -----------
NET INTEREST
INCOME AFTER
PROVISION FOR
LOAN LOSSES 38,353 38,301 115,901 136,833
----------- ----------- ----------- -----------
NON-INTEREST
INCOME
Fees and
service
charges, net
of amortization 4,233 6,454 15,249 18,871
Mortgage
servicing
assets recovery
(impairment) 3,972 67 (2,596) 32
Net gain on the
sale of loans 9,413 828 28,863 3,282
Increase in and
death benefits
from bank owned
life insurance
contracts 1,646 1,659 4,917 4,921
Income (loss) on
private equity
investments 542 1,158 (1,028) 3,173
Other 1,721 1,780 5,176 5,420
----------- ----------- ----------- -----------
Total
non-interest
income 21,527 11,946 50,581 35,699
----------- ----------- ----------- -----------
NON-INTEREST
EXPENSE:
Salaries and
employee
benefits 20,330 17,931 59,105 54,422
Marketing
services 900 3,525 7,952 10,578
Office property,
equipment,
and software 5,654 4,932 16,536 13,891
Federal
insurance
premium 9,771 1,964 15,528 3,258
State franchise
tax 1,211 1,657 3,988 4,027
Real estate
owned expense,
net 1,582 2,036 5,787 4,815
Other operating
expenses 6,374 7,286 17,890 18,459
----------- ----------- ----------- -----------
Total
non-interest
expense 45,822 39,331 126,786 109,450
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 14,058 10,916 39,696 63,082
INCOME TAX
EXPENSE 4,022 4,126 12,411 22,653
----------- ----------- ----------- -----------
NET INCOME $ 10,036 $ 6,790 $ 27,285 $ 40,429
=========== =========== =========== ===========
Earnings per
share - basic
and fully
diluted $ 0.03 $ 0.02 $ 0.09 $ 0.13
Weighted
average shares
outstanding
Basic 300,245,981 320,510,396 301,741,110 321,795,514
Diluted 300,635,381 320,510,396 302,111,141 321,795,514
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended
June 30, 2009
-------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
----------- ----------- -----
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 1,600 $ 1 0.25%
Other interest-bearing
cash equivalents 169,897 61 0.14%
Investment securities 18,124 111 2.45%
Mortgage-backed securities 680,675 6,439 3.78%
Loans 9,567,973 110,863 4.63%
Federal Home Loan Bank stock 35,620 395 4.44%
----------- -----------
Total interest-earning assets 10,473,889 117,870 4.50%
-----------
Non-interest-earning assets 307,035
-----------
Total assets $10,780,924
===========
Interest-bearing liabilities:
NOW accounts $ 1,042,960 1,779 0.68%
Passbook savings 1,127,302 3,497 1.24%
Certificates of deposit 6,248,253 53,756 3.44%
Borrowed funds 182,293 485 1.06%
----------- -----------
Total interest-bearing
liabilities 8,600,808 59,517 2.77%
-----------
Non-interest-bearing liabilities 392,571
-----------
Total liabilities 8,993,379
Shareholders' equity 1,787,545
-----------
Total liabilities and
shareholders' equity $10,780,924
===========
Net interest income $ 58,353
===========
Interest rate spread(b) 1.73%
=====
Net interest-earning assets(c) $ 1,873,081
===========
Net interest margin(d) 2.23%(a)
===========
Average interest-earning assets
to average interest-bearing
liabilities 121.78%
===========
Three Months Ended
June 30, 2008
-------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
----------- ----------- -----
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 231,237 $ 1,254 2.17%
Other interest-bearing
cash equivalents 53,258 331 2.49%
Investment securities 28,987 222 3.06%
Mortgage-backed securities 915,114 10,638 4.65%
Loans 8,808,113 118,645 5.39%
Federal Home Loan Bank stock 34,683 474 5.47%
----------- -----------
Total interest-earning assets 10,071,392 131,564 5.23%
-----------
Non-interest-earning assets 341,596
-----------
Total assets $10,412,988
===========
Interest-bearing liabilities:
NOW accounts $ 1,266,661 5,974 1.89%
Passbook savings 1,411,285 8,647 2.45%
Certificates of deposit 5,481,524 60,623 4.42%
Borrowed funds 3,570 19 2.13%
----------- -----------
Total interest-bearing
liabilities 8,163,040 75,263 3.69%
-----------
Non-interest-bearing liabilities 235,368
-----------
Total liabilities 8,398,408
Shareholders' equity 2,014,580
-----------
Total liabilities and
shareholders' equity $10,412,988
===========
Net interest income $ 56,301
===========
Interest rate spread(b) 1.54%
=====
Net interest-earning assets(c) $ 1,908,352
===========
Net interest margin(d) 2.24%(a)
===========
Average interest-earning assets
to average interest-bearing
liabilities 123.38%
===========
(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
June 30, 2009
-------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
----------- ----------- -----
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 455 $ 1 0.29%
Other interest-bearing
cash equivalents 57,587 72 0.17%
Investment securities 17,775 360 2.70%
Mortgage-backed securities 753,043 23,540 4.17%
Loans 9,626,338 347,955 4.82%
Federal Home Loan Bank stock 35,620 1,240 4.64%
----------- -----------
Total interest-earning assets 10,490,818 373,168 4.74%
-----------
Non-interest-earning assets 322,585
-----------
Total assets $10,813,403
===========
Interest-bearing liabilities:
NOW accounts $ 1,061,972 7,584 0.95%
Passbook savings 1,124,485 12,743 1.51%
Certificates of deposit 6,153,471 176,838 3.83%
Borrowed funds 346,722 2,102 0.81%
----------- -----------
Total interest-bearing
liabilities 8,686,650 199,267 3.06%
-----------
Non-interest-bearing liabilities 323,682
-----------
Total liabilities 9,010,332
Shareholders' equity 1,803,071
-----------
Total liabilities and
shareholders' equity $10,813,403
===========
Net interest income $ 173,901
===========
Interest rate spread(b) 1.68%
=====
Net interest-earning assets(c) $ 1,804,168
===========
Net interest margin(d) 2.21%(a)
===========
Average interest-earning assets
to average interest-bearing
liabilities 120.77%
===========
Nine Months Ended
June 30, 2008
-------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
----------- ----------- -----
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 515,548 $ 14,480 3.74%
Other interest-bearing
cash equivalents 53,294 1,522 3.81%
Investment securities 44,972 1,205 3.57%
Mortgage-backed securities 892,649 33,679 5.03%
Loans 8,526,432 363,713 5.69%
Federal Home Loan Bank stock 34,383 1,525 5.91%
----------- -----------
Total interest-earning assets 10,067,278 416,124 5.51%
-----------
Non-interest-earning assets 347,824
-----------
Total assets $10,415,102
===========
Interest-bearing liabilities:
NOW accounts $ 1,323,877 25,847 2.60%
Passbook savings 1,258,262 29,856 3.16%
Certificates of deposit 5,608,577 198,069 4.71%
Borrowed funds 1,190 19 2.13%
----------- -----------
Total interest-bearing
liabilities 8,191,906 253,791 4.13%
-----------
Non-interest-bearing liabilities 207,338
----------
Total liabilities 8,399,244
Shareholders' equity 2,015,858
----------
Total liabilities and
shareholders' equity $10,415,102
===========
Net interest income $ 162,333
===========
Interest rate spread(b) 1.38%
=====
Net interest-earning assets(c) $ 1,875,372
===========
Net interest margin(d) 2.15%(a)
===========
Average interest-earning assets
to average interest-bearing
liabilities 122.89%
===========
(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.