Exhibit 99.1
Contact: | Monica Martines (216) 441-7346 | |
Cherie Skoczen (216) 429-5194 |
For release Thursday, May 8, 2008
TFS Financial Corporation Announces Second Fiscal Quarter Ended March 31, 2008 Financial Results
(Cleveland, OH – May 8, 2008) – 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 six month periods ended March 31, 2008.
The Company reported net income of $14.8 million for the three months ended March 31, 2008, compared to net income of $12.0 million for the three months ended March 31, 2007. Net income of $33.6 million was reported for the six months ended March 31, 2008, compared to net income of $27.8 million for the six months ended March 31, 2007.
Net interest income increased by $9.2 million, or 21.1%, to $53.1 million for the three months ended March 31, 2008 from $43.8 million for the three months ended March 31, 2007. The increase primarily resulted from reinvestment of the proceeds from its public stock offering. Nevertheless, the Company experienced a further compression of its interest rate spread, which decreased 30 basis points to 1.33% for the three months ended March 31, 2008 from 1.63% for the three months ended March 31, 2007. Net interest margin increased four basis points to 2.10% for the three months ended March 31, 2008 from 2.06% for the three months ended March 31, 2007. Net interest income increased by $17.6 million, or 19.9%, to $106.0 million for the six months ended March 31, 2008 from $88.4 million for the six months ended March 31, 2007.
The Company’s provision for loan losses was $4.5 million for the three months ended March 31, 2008 and $2.3 million for the three months ended March 31, 2007. The provisions exceeded net chargeoffs of $2.5 million and $658 thousand for the three months ended March 31, 2008 and 2007, respectively. The Company’s provision for loan losses was $7.5 million for the six months ended March 31, 2008 and $4.3 million for the six months ended March 31, 2007. The provisions exceeded net chargeoffs of $4.5 million and $2.1 million for the six months ended March 31, 2008 and 2007, respectively. The allowance for loan losses was $28.1 million, or 0.33% of total loans receivable at March 31, 2008, compared to $25.1 million, or 0.31% of total loans receivable, at September 30, 2007. The allowance for loan losses was increased to address the potential risk from an increase in non-performing loans. Nonperforming loans increased by $22.9 million to $136.4 million, or 1.59% of total loans, at March 31, 2008 from $113.5 million, or 1.39% of total loans, at September 30, 2007. Of the $22.9 million increase in nonperforming loans for the six months ended March 31, 2008, $13.2 million occurred in the home equity loans and lines of credit portfolio and $8.6 million occurred in the residential, non-Home Today portfolio. Non-performing loans in the Home Today program increased slightly by $123 thousand to $55.8 million for the six months ended March 31, 2008. As of March 31, 2008, there were $307.4 million of loans outstanding that were originated through the Home Today program, compared to $304.0 million, at September 30, 2007. As of March 31, 2008, the home equity loans and lines of credit portfolio was $2.1 billion, compared to $1.9 billion, at September 30 2007.
Non-interest expense increased $3.7 million, to $70.1 million for the six months ended March 31, 2008 from $66.5 million for the six months ended March 31, 2007. This increase was primarily a result of an increase of $1.4 million in disposition costs and losses associated with real estate owned parcels and an increase of $759 thousand for the professional expenses related to being a public company.
Total assets increased by $182.8 million to $10.5 billion at March 31, 2008 from $10.3 billion at September 30, 2007. The growth in assets was funded principally by a $117.2 million increase in deposits, and to a lesser extent by increased principal, interest and related escrow on loans serviced as well as additional retained earnings.
Deposits increased $117.2 million, or 1.4%, to $8.3 billion at March 31, 2008 from $8.1 billion at September 30, 2007. The increase in deposits resulted from a $388 million increase in high-yield savings accounts, which was offset by a $166 million decrease in high-yield checking accounts, a $93 million decrease in certificate of deposits, combined with modest declines in other deposit products (other savings accounts and other NOW accounts) for the six month period ending March 31, 2008.
The $36.5 million increase in principal, interest, and related escrow owed on loans serviced, to $114.4 million at March 31, 2008 from $77.9 million at September 30, 2007 is related 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.
Shareholders’ equity increased $34 million, to $2.02 billion at March 31, 2008 from $1.99 billion at September 30, 2007. This reflects $34 million net income during the six-month period reduced by $4.8 million in dividends paid on shares of common stock (other than Third Federal Savings, MHC and unallocated ESOP shares) in the current quarter. The remainder reflects adjustments related to the allocation of shares of common stock related to the ESOP.
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)
March 31, 2008 | September 30, 2007 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 49,210 | $ | 45,666 | ||||
Federal funds sold | 420,000 | 598,400 | ||||||
Other interest-bearing cash equivalents | 53,354 | 185,649 | ||||||
Cash and cash equivalents | 522,564 | 829,715 | ||||||
Investment securities: | ||||||||
Available for sale (amortized cost $53,922 and $57,025, respectively) | 54,382 | 56,681 | ||||||
Held to maturity (fair value $923,172 and $825,342, respectively) | 919,202 | 823,815 | ||||||
Investment securities | 973,584 | 880,496 | ||||||
Mortgage loans held for sale, at lower of cost or market | 99,745 | 107,962 | ||||||
Loans held for investment, net: | ||||||||
Mortgage loans | 8,510,875 | 8,103,300 | ||||||
Other loans | 10,939 | 14,692 | ||||||
Deferred loan fees, net | (16,437 | ) | (19,174 | ) | ||||
Allowance for loan losses | (28,126 | ) | (25,111 | ) | ||||
Loans held for investment, net | 8,477,251 | 8,073,707 | ||||||
Mortgage loan servicing assets, net | 41,687 | 41,064 | ||||||
Federal Home Loan Bank stock, at cost | 34,678 | 34,231 | ||||||
Real estate owned | 12,031 | 9,903 | ||||||
Premises, equipment, and software, net | 69,152 | 69,669 | ||||||
Accrued interest receivable | 45,566 | 48,364 | ||||||
Bank owned life insurance contracts | 147,754 | 144,498 | ||||||
Other assets | 36,815 | 38,420 | ||||||
TOTAL ASSETS | $ | 10,460,827 | $ | 10,278,029 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Deposits | $ | 8,258,458 | $ | 8,141,215 | ||||
Borrowers’ advances for insurance and taxes | 38,640 | 40,481 | ||||||
Principal, interest, and related escrow owed on loans serviced | 114,358 | 77,908 | ||||||
Accrued expenses and other liabilities | 28,907 | 32,224 | ||||||
Total liabilities | 8,440,363 | 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 and outstanding | 3,323 | 3,323 | ||||||
Paid-in capital | 1,669,085 | 1,668,215 | ||||||
Unallocated ESOP shares | (96,718 | ) | (100,597 | ) | ||||
Retained earnings—substantially restricted | 450,373 | 421,503 | ||||||
Accumulated other comprehensive loss | (5,599 | ) | (6,243 | ) | ||||
Total shareholders' equity | 2,020,464 | 1,986,201 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 10,460,827 | $ | 10,278,029 | ||||
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, | ||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||
INTEREST AND DIVIDEND INCOME: | |||||||||||||
Loans, including fees | $ | 121,101 | $ | 115,132 | $ | 245,068 | $ | 231,565 | |||||
Investment securities available for sale | 502 | 661 | 1,060 | 1,360 | |||||||||
Investment securities held to maturity | 11,329 | 3,868 | 22,965 | 5,388 | |||||||||
Federal funds sold | 4,980 | 5,688 | 13,226 | 11,528 | |||||||||
Other interest earning assets | 980 | 1,171 | 2,241 | 2,412 | |||||||||
Total interest income | 138,892 | 126,520 | 284,560 | 252,253 | |||||||||
INTEREST EXPENSE: | |||||||||||||
Deposits | 85,832 | 82,394 | 178,528 | 163,186 | |||||||||
Federal Home Loan Bank advances | — | 308 | — | 623 | |||||||||
Total interest expense | 85,832 | 82,702 | 178,528 | 163,809 | |||||||||
NET INTEREST INCOME | 53,060 | 43,818 | 106,032 | 88,444 | |||||||||
PROVISION FOR LOAN LOSSES | 4,500 | 2,250 | 7,500 | 4,250 | |||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 48,560 | 41,568 | 98,532 | 84,194 | |||||||||
NON-INTEREST INCOME | |||||||||||||
Fees and service charges | 6,049 | 6,190 | 12,382 | 12,359 | |||||||||
Net gain (loss) on the sale of loans | 1,255 | 446 | 2,454 | (365 | ) | ||||||||
Increase in and death benefits from bank owned life insurance contracts | 1,605 | 1,560 | 3,262 | 3,125 | |||||||||
Net income on private equity investments | 87 | 627 | 2,015 | 3,231 | |||||||||
Other | 1,824 | 2,275 | 3,640 | 5,169 | |||||||||
Total non-interest income | 10,820 | 11,098 | 23,753 | 23,519 | |||||||||
NON-INTEREST EXPENSE: | |||||||||||||
Salaries and employee benefits | 18,136 | 18,990 | 36,491 | 36,319 | |||||||||
Marketing services | 3,528 | 3,352 | 7,053 | 6,702 | |||||||||
Office property, equipment, and software | 4,440 | 4,873 | 8,959 | 9,375 | |||||||||
Federal insurance premium | 663 | 585 | 1,294 | 1,158 | |||||||||
State franchise tax | 1,663 | 830 | 2,370 | 1,814 | |||||||||
Other operating expenses | 7,586 | 6,306 | 13,952 | 11,090 | |||||||||
Total non-interest expense | 36,016 | 34,936 | 70,119 | 66,458 | |||||||||
INCOME BEFORE INCOME TAXES | 23,364 | 17,730 | 52,166 | 41,255 | |||||||||
INCOME TAX EXPENSE | 8,541 | 5,743 | 18,527 | 13,437 | |||||||||
NET INCOME | $ | 14,823 | $ | 11,987 | $ | 33,639 | $ | 27,818 | |||||
Earnings per share - basic and fully diluted | $ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.12 | |||||
Weighted average shares outstanding—basic and fully diluted | 322,542,871 | 227,119,132 | 322,433,686 | 227,119,132 |
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||||||||||||||||
Average Balance | Interest Income/ Expense | Yield/ Cost(a) | Average Balance | Interest Income/ Expense | Yield/ Cost(a) | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Federal funds sold | $ | 605,971 | $ | 4,980 | 3.29 | % | $ | 433,365 | $ | 5,688 | 5.25 | % | ||||||||||
Other interest-bearing cash equivalents | 53,660 | 532 | 3.97 | % | 17,007 | 214 | 5.03 | % | ||||||||||||||
Investment securities | 45,294 | 385 | 3.40 | % | 49,809 | 474 | 3.81 | % | ||||||||||||||
Mortgage-backed securities | 908,143 | 11,447 | 5.04 | % | 314,921 | 4,055 | 5.15 | % | ||||||||||||||
Loans | 8,448,980 | 121,101 | 5.73 | % | 7,638,845 | 115,132 | 6.03 | % | ||||||||||||||
Federal Home Loan Bank stock | 34,236 | 447 | 5.22 | % | 67,564 | 957 | 5.67 | % | ||||||||||||||
Total interest-earning assets | 10,096,284 | 138,892 | 5.50 | % | 8,521,511 | 126,520 | 5.94 | % | ||||||||||||||
Non-interest-earning assets | 345,551 | 380,876 | ||||||||||||||||||||
Total assets | $ | 10,441,835 | $ | 8,902,387 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,303,663 | 8,256 | 2.53 | % | $ | 1,724,044 | 17,527 | 4.07 | % | ||||||||||||
Savings accounts | 1,268,503 | 10,322 | 3.25 | % | 432,869 | 1,263 | 1.17 | % | ||||||||||||||
Certificates of deposit | 5,660,668 | 67,254 | 4.75 | % | 5,490,111 | 63,604 | 4.63 | % | ||||||||||||||
FHLB advances | — | — | — | 25,103 | 308 | 4.91 | % | |||||||||||||||
Total interest-bearing liabilities | 8,232,834 | 85,832 | 4.17 | % | 7,672,127 | 82,702 | 4.31 | % | ||||||||||||||
Non-interest-bearing liabilities | 183,432 | 195,432 | ||||||||||||||||||||
Total liabilities | 8,416,266 | 7,867,559 | ||||||||||||||||||||
Shareholders' equity | 2,025,569 | 1,034,828 | ||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 10,441,835 | $ | 8,902,387 | ||||||||||||||||||
Net interest income | $ | 53,060 | $ | 43,818 | ||||||||||||||||||
Interest rate spread (b) | 1.33 | % | 1.63 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,863,450 | $ | 849,384 | ||||||||||||||||||
Net interest margin (d) | 2.10 | % (a) | 2.06 | % (a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 122.63 | % | 111.07 | % | ||||||||||||||||||
(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)
Six Months Ended March 31, 2008 | Six Months Ended March 31, 2007 | |||||||||||||||||||||
Average Balance | Interest Income/ Expense | Yield/ Cost(a) | Average Balance | Interest Income/ Expense | Yield/ Cost(a) | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Federal funds sold | $ | 657,703 | $ | 13,226 | 4.02 | % | $ | 439,910 | $ | 11,528 | 5.24 | % | ||||||||||
Other interest-bearing cash equivalents | 53,311 | 1,190 | 4.46 | % | 13,874 | 349 | 5.03 | % | ||||||||||||||
Investment securities | 52,965 | 984 | 3.72 | % | 47,513 | 905 | 3.81 | % | ||||||||||||||
Mortgage-backed securities | 881,416 | 23,041 | 5.23 | % | 227,053 | 5,843 | 5.15 | % | ||||||||||||||
Loans | 8,385,593 | 245,068 | 5.84 | % | 7,671,726 | 231,565 | 6.04 | % | ||||||||||||||
Federal Home Loan Bank stock | 34,233 | 1,051 | 6.14 | % | 70,437 | 2,063 | 5.86 | % | ||||||||||||||
Total interest-earning assets | 10,065,221 | 284,560 | 5.65 | % | 8,470,513 | 252,253 | 5.96 | % | ||||||||||||||
Non-interest-earning assets | 350,938 | 322,676 | ||||||||||||||||||||
Total assets | $ | 10,416,159 | $ | 8,793,189 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,352,485 | 19,873 | 2.94 | % | $ | 1,684,298 | 34,477 | 4.09 | % | ||||||||||||
Savings accounts | 1,181,751 | 21,209 | 3.59 | % | 380,480 | 2,029 | 1.07 | % | ||||||||||||||
Certificates of deposit | 5,672,103 | 137,446 | 4.85 | % | 5,492,409 | 126,680 | 4.61 | % | ||||||||||||||
FHLB advances | — | — | 0.00 | % | 25,103 | 623 | 0.00 | % | ||||||||||||||
Total interest-bearing liabilities | 8,206,339 | 178,528 | 4.35 | % | 7,582,290 | 163,809 | 4.32 | % | ||||||||||||||
Non-interest-bearing liabilities | 193,323 | 183,521 | ||||||||||||||||||||
Total liabilities | 8,399,662 | 7,765,811 | ||||||||||||||||||||
Shareholders' equity | 2,016,497 | 1,027,378 | ||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 10,416,159 | $ | 8,793,189 | ||||||||||||||||||
Net interest income | $ | 106,032 | $ | 88,444 | ||||||||||||||||||
Interest rate spread (b) | 1.30 | % | 1.64 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,858,882 | $ | 888,223 | ||||||||||||||||||
Net interest margin (d) | 2.11 | % (a) | 2.09 | % (a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 122.65 | % | 111.71 | % | ||||||||||||||||||
(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. |