Exhibit 99.1
Contact: | Monica Martines | (216) 441-7346 / cell (216) 533-3751 | ||
Jennifer Rosa | (216) 429-5037 |
For release Tuesday, November 25, 2008
TFS Financial Corporation Announces Fourth Quarter and Year Ended September 30, 2008 Financial Results
(Cleveland, OH – November 25, 2008) – TFS Financial Corporation (NASDAQ: TFSL) (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland, today announced quarterly and fiscal year results for the period ended September 30, 2008 and completion of its second stock repurchase program.
The Company reported net income of $14.1 million for the three months ended September 30, 2008, compared to net income of $15.1 million for the three months ended September 30, 2007. Net income of $54.5 million was reported for the year ended September 30, 2008, compared to net income of $25.6 million for the year ended September 30, 2007. This increase is attributed primarily to a non-recurring $55 million pre-tax contribution expense in the prior year related to the formation of the Third Federal Foundation.
Net interest income increased by $26.7 million, or 14%, to $219.9 million for the year ended September 30, 2008 from $193.2 million for the year ended September 30, 2007. The increase resulted primarily from the increase of $564.9 million in average net interest earning assets, to $1.85 billion in the current fiscal year from $1.28 billion during the prior fiscal year, reflecting the impact of investment of the net proceeds from our initial public offering which was completed in April 2007.
We recorded a provision for loan losses of $9.0 million for the three months ended September 30, 2008 and $3.3 million for the three months ended September 30, 2007. The provisions exceeded net charge-offs of $7.4 million and $2.0 million for the three months ended September 30, 2008 and 2007, respectively. The Company’s provision for loan losses was $34.5 million for the year ended September 30, 2008 and $9.6 million for the year ended September 30, 2007. The provisions recorded exceeded net charge-offs of $15.8 million and $5.2 million for the fiscal years ended September 30, 2008 and 2007, respectively. Beginning as of June 30, 2008, due to unfavorable trends in primary lending markets, the provision for loan losses reflect the results of our expanded loan level evaluation of equity lines of credit which are delinquent 90 or more days. We expect that, as the equity lines of credit that were the subject of our expanded evaluation are resolved, we will realize an increase in net charge-offs that will be applied against the allowance. The allowance for loan losses was $43.8 million or 0.47% of total loans receivable at September 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 of non-performing loans in the current economic environment and in response to
the results of our expanded evaluation of equity lines of credit delinquent 90 days or more. Non-performing loans increased by $59.3 million to $172.9 million, or 1.86% of total loans, at September 30, 2008 from $113.5 million, or 1.39% of total loans, at September 30, 2007.
Non-interest income decreased $3.6 million to $47.8 million for the year ended September 30, 2008 from $51.4 million for the year ended September 30, 2007. This decrease was mainly due to a $3.2 million gain recognized in connection with the sale, during fiscal year 2007, of a commercial office building owned by a subsidiary that invests in commercial office buildings and leases them to unaffiliated parties.
Non-interest expense decreased $39.7 million, or 21%, to $151.4 million for the year ended September 30, 2008 from $191.1 million for the year ended September 30, 2007. The decrease resulted primarily from the absence of the $55 million, pre-tax charitable contribution to the Third Federal Foundation made in conjunction with our initial public offering in April 2007 offset by increases in salaries and employee benefit expense, in federal insurance premiums, state franchise tax, real estate owned expenses and in other operating expenses.
Total assets increased by $508.4 million, or 5%, to $10.79 billion at September 30, 2008 from $10.28 billion at September 30, 2007.
Cash and cash equivalents decreased $697.3 million, or 84%, to $132.4 million at September 30, 2008 from $829.7 million at September 30, 2007, as we continued to redeploy our liquid assets into loan products that provide higher yields along with longer maturities.
Our net loans held for investment increased $1.14 billion, or 14%, to $9.21 billion at September 30, 2008 from $8.07 billion at September 30, 2007.
Deposits increased $119.9 million, or 1%, to $8.26 billion at September 30, 2008 from $8.14 billion at September 30, 2007.The increase in deposits was the result of a $193.3 million increase in high-yield savings accounts (a subcategory of our savings accounts) along with a $282.7 million increase in certificates of deposit, offset by a $334.1 million decrease in our high yield-checking accounts combined with declines in other deposit products (other savings accounts and other NOW accounts) in the current fiscal year.
The $498.0 million increase in borrowed funds consists of Federal Home Loan Bank advances. The borrowed funds primarily reflected the growth in the amount of mortgage loans that we held in our portfolio which were not funded with cash and cash equivalents on hand or increases in deposits. We had no borrowed funds at the end of fiscal year 2007.
Stockholders’ equity decreased $142.5 million, to $1.84 billion at September 30, 2008 from $1.99 billion at September 30, 2007. This reflects $54.5 million of net income during the year reduced by $192.7 million of repurchases of outstanding common stock and $13.8 million in dividends paid on our shares of common stock (other than the shares held by Third Federal Savings, MHC and unallocated ESOP shares) in the current fiscal year. The remainder reflects mainly adjustments related to the allocation of shares of our common stock related to the ESOP. Approximately 16.1 million shares of common stock were repurchased during the year ended September 30, 2008.
The Company announced today the completion of its second repurchase program of 5,000,000 shares of its outstanding common stock. A combined total of 20,800,000 shares were purchased under the first and second repurchase programs at a weighted average price of $12.16 per share. The repurchased shares will be held as treasury stock and will be available for general corporate purposes.
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 or Freddie Mac; |
• | 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; |
• | 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
(In thousands, except share data)
September 30, 2008 | September 30, 2007 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 57,888 | $ | 45,666 | ||||
Federal funds sold | 598,400 | |||||||
Other interest-bearing cash equivalents | 74,491 | 185,649 | ||||||
Cash and Cash equivalents | 132,379 | 829,715 | ||||||
Investment securities | ||||||||
Available for sale (amortized cost $30,861 and $57,025, respectively) | 31,102 | 56,681 | ||||||
Held to maturity (fair value $820,047 and $825,342, respectively) | 817,750 | 823,815 | ||||||
Investment securities | 848,852 | 880,496 | ||||||
Mortgage loans held for sale, at lower of cost or market | 200,670 | 107,962 | ||||||
Loans held for investment, net: | ||||||||
Mortgage loans | 9,259,529 | 8,103,300 | ||||||
Other loans | 7,599 | 14,692 | ||||||
Deferred loan fees, net | (14,596 | ) | (19,174 | ) | ||||
Allowance for loan losses | (43,796 | ) | (25,111 | ) | ||||
Loans held for investment, net | 9,208,736 | 8,073,707 | ||||||
Mortgage loan servicing rights, net | 41,526 | 41,064 | ||||||
Federal Home Loans Bank stock, at cost | 35,620 | 34,231 | ||||||
Real estate owned | 14,108 | 9,903 | ||||||
Premises, equipment, and software, net | 68,112 | 69,669 | ||||||
Accrued interest receivable | 46,371 | 48,364 | ||||||
Bank owned life insurance contracts | 151,294 | 144,498 | ||||||
Other assets | 38,783 | 38,420 | ||||||
TOTAL ASSETS | $ | 10,786,451 | $ | 10,278,029 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits | $ | 8,261,101 | $ | 8,141,215 | ||||
Borrowed funds | 498,028 | — | ||||||
Borrowers' advances for insurance and taxes | 48,439 | 40,481 | ||||||
Principal, interest, and related escrow owed on loans serviced | 80,675 | 77,908 | ||||||
Accrued expenses and other liabilities | 54,556 | 32,224 | ||||||
Total liabilities | 8,942,799 | 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; 316,233,550 and 332,318,750 outstanding at September 30, 2008 and September 30, 2007, respectively |
| 3,323 |
|
| 3,323 |
| ||
Paid-in capital | 1,672,953 | 1,668,215 | ||||||
Treasury stock, at cost; 16,085,200 shares at September 30, 2008 | (192,662 | ) | — | |||||
Unallocated ESOP shares | (93,545 | ) | (100,597 | ) | ||||
Retained earnings—substantially restricted | 462,190 | 421,503 | ||||||
Accumulated other comprehensive loss | (8,607 | ) | (6,243 | ) | ||||
Total shareholders’ equity | 1,843,652 | 1,986,201 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 10,786,451 | 10,278,029 | ||||||
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share data)
For the Three Months Ended September 30, | For the Fiscal Year Ended September 30, | |||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||
INTEREST AND DIVIDEND INCOME: | ||||||||||||
Loans, including fees | $ | 123,227 | $ | 122,102 | $ | 486,940 | $ | 469,755 | ||||
Investment securities available for sale | 273 | 591 | 1,721 | 2,575 | ||||||||
Investment securities held to maturity | 9,811 | 10,154 | 43,247 | 22,777 | ||||||||
Federal funds sold | 5 | 11,454 | 14,485 | 38,352 | ||||||||
Other interest earning assets | 743 | 1,057 | 3,790 | 4,266 | ||||||||
Total interest income | 134,059 | 145,358 | 550,183 | 537,725 | ||||||||
INTEREST EXPENSE: | ||||||||||||
Deposits | 75,027 | 93,296 | 328,799 | 343,511 | ||||||||
Federal Home Loan Bank advances | 1,503 | 79 | 1,522 | 1,012 | ||||||||
Total interest expense | 76,530 | 93,375 | 330,321 | 344,523 | ||||||||
NET INTEREST INCOME | 57,529 | 51,983 | 219,862 | 193,202 | ||||||||
PROVISION FOR LOAN LOSSES | 9,000 | 3,250 | 34,500 | 9,600 | ||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 48,529 | 48,733 | 185,362 | 183,602 | ||||||||
NON-INTEREST INCOME: | ||||||||||||
Fees and service charges | 6,542 | 6,474 | 25,445 | 25,314 | ||||||||
Net gain on the sale of loans | 614 | 1,010 | 3,896 | 15 | ||||||||
Increase in and death benefits from bank owned life insurance contracts | 3,376 | 3,370 | 8,297 | 8,090 | ||||||||
Net income on private equity investments | 317 | 961 | 3,490 | 5,431 | ||||||||
Other | 1,232 | 1,874 | 6,652 | 12,539 | ||||||||
Total non-interest income | 12,081 | 13,689 | 47,780 | 51,389 | ||||||||
NON-INTEREST EXPENSE | ||||||||||||
Salaries and employee benefits | 21,497 | 18,721 | 75,919 | 72,996 | ||||||||
Marketing services | 3,569 | 3,473 | 14,147 | 13,528 | ||||||||
Office property, equipment, and software | 5,406 | 5,316 | 19,297 | 19,709 | ||||||||
Federal insurance premium | 2,119 | 652 | 5,377 | 2,401 | ||||||||
State franchise tax | 1,384 | 455 | 5,411 | 3,110 | ||||||||
Contribution to charitable foundation | — | — | — | 55,000 | ||||||||
Real estate owned expense, net | 1,472 | 339 | 6,287 | 2,563 | ||||||||
Other operating expenses | 6,550 | 7,262 | 25,009 | 21,802 | ||||||||
Total non-interest expense | 41,997 | 36,218 | 151,447 | 191,109 | ||||||||
INCOME BEFORE INCOME TAXES | 18,613 | 26,204 | 81,695 | 43,882 | ||||||||
INCOME TAX EXPENSE | 4,552 | 11,154 | 27,205 | 18,271 | ||||||||
NET INCOME | 14,061 | 15,050 | 54,490 | 25,611 | ||||||||
Earnings per share - basic and fully diluted | $ | 0.04 | $ | 0.05 | $ | 0.17 | $ | 0.10 | ||||
Weighted average shares outstanding | ||||||||||||
Basic | 312,213,480 | 322,128,607 | 319,386,915 | 269,513,427 | ||||||||
Fully diluted | 312,674,195 | 322,128,607 | 319,502,094 | 269,513,427 |
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||||||||||||
Average Balance | Interest Income/ Expense | Yield/ Cost | Average Balance | Interest Income/ Expense | Yield/ Cost | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Federal funds sold | $ | 386,892 | $ | 14,485 | 3.74 | % | $ | 736,711 | $ | 38,352 | 5.21 | % | ||||||||||
Other interest-bearing cash equivalents | 51,606 | 1,797 | 3.48 | % | 20,795 | 1,087 | 5.23 | % | ||||||||||||||
Investment securities | 37,925 | 1,333 | 3.51 | % | 54,365 | 2,191 | 4.03 | % | ||||||||||||||
Mortgage-backed securities | 883,795 | 43,635 | 4.94 | % | 429,244 | 23,161 | 5.40 | % | ||||||||||||||
Loans | 8,706,421 | 486,940 | 5.59 | % | 7,775,810 | 469,755 | 6.04 | % | ||||||||||||||
Federal Home Loan Bank stock | 34,575 | 1,993 | 5.76 | % | 52,334 | 3,179 | 6.07 | % | ||||||||||||||
Total interest-earning assets | 10,101,214 | 550,183 | 5.45 | % | 9,069,259 | 537,725 | 5.93 | % | ||||||||||||||
Non-interest-earning assets | 344,725 | 332,323 | ||||||||||||||||||||
Total assets | $ | 10,445,939 | $ | 9,401,582 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,283,387 | 31,231 | 2.43 | % | $ | 1,621,548 | 66,221 | 4.08 | % | ||||||||||||
Savings & subscription proceeds | 1,261,396 | 37,571 | 2.98 | % | 649,414 | 17,605 | 2.71 | % | ||||||||||||||
Certificates of deposit | 5,638,716 | 259,997 | 4.61 | % | 5,495,449 | 259,685 | 4.73 | % | ||||||||||||||
Borrowed funds | 70,218 | 1,522 | 2.17 | % | 20,274 | 1,012 | 4.99 | % | ||||||||||||||
Total interest-bearing liabilities | 8,253,717 | 330,321 | 4.00 | % | 7,786,685 | 344,523 | 4.42 | % | ||||||||||||||
Non-interest-bearing liabilities | 201,287 | 156,930 | ||||||||||||||||||||
Total liabilities | 8,455,004 | 7,943,615 | ||||||||||||||||||||
Shareholders’ equity | 1,990,935 | 1,457,967 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,445,939 | $ | 9,401,582 | ||||||||||||||||||
Net interest income | $ | 219,862 | $ | 193,202 | ||||||||||||||||||
Interest rate spread (a) | 1.45 | % | 1.51 | % | ||||||||||||||||||
Net interest-earning assets (b) | $ | 1,847,497 | $ | 1,282,574 | ||||||||||||||||||
Net interest margin (c) | 2.18 | % | 2.13 | % | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 122.38 | % | 116.47 | % | ||||||||||||||||||
(a) | Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
(b) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. |
(c) | Net interest margin represents net interest income divided by total interest-earning assets. |