Exhibit 99.1
Contact: | Monica Martines | (216) 441-7346 / cell (216) 533-3751 | ||
Jennifer Rosa | (216) 429-5037 |
For release Wednesday, February 4, 2009
TFS Financial Corporation Announces First Fiscal Quarter Ended December 31, 2008 Financial Results
(Cleveland, OH – February 4, 2009) – TFS Financial Corporation (NASDAQ: TFSL) (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland, today announced results for the quarter ended December 31, 2008.
The Company reported net income of $11.5 million for the three months ended December 31, 2008, compared to net income of $18.8 million for the three months ended December 31, 2007. This decrease can be attributed primarily to an increase in the provision for loan losses and increases in non-interest expenses.
Interest income decreased $14.3 million, or 10%, to $131.4 million for the three months ended December 31, 2008 from $145.7 for the three months ended December 31, 2007. The decrease resulted primarily from a decrease in the yield received on interest earning assets, as a result of decreases in market interest rates.
Interest expense decreased $16.8 million, or 18%, to $75.9 for the three months ended December 31, 2008 from $92.7 million for the three months ended December 31, 2007. The decrease can also be primarily attributed to a decrease in market interest rates, as well as the use of lower cost Federal Home Loan Bank advances as a funding source.
In response to the challenging economic environment, we recorded a provision for loan losses of $10.0 million for the three months ended December 31, 2008 and $3.0 million for the three months ended December 31, 2007. The provisions exceeded net charge-offs of $5.0 million and $2.0 million for the quarters ended December 31, 2008 and 2007, respectively. We expect that, as the equity lines of credit that have become delinquent 90 days or more are resolved, we will realize an increase in net charge-offs that will be applied against the allowance. The allowance for loan losses was $48.8 million, or 0.51% of total loans receivable, at December 31, 2008, compared to $43.8 million, or 0.47% of total loans receivable, at September 30, 2008, and further compared to $26.1 million or 0.31% of total loans receivable at December 31, 2007. Non-performing loans increased $30.2 million to $203.1 million, or 2.13% of total loans, at December 31, 2008 from $172.9 million, or 1.86% of total loans, at September 30, 2008, and, further, non-performing loans increased $73.3 million compared to $129.8 million, or 1.55% of total loans, at December 31, 2007. For purposes of comparability, effective June 30, 2008 and quarterly thereafter, based on the increased risk related to increases in non-performing loans we expanded our evaluation of equity lines of credit delinquent 90 days or more.
Non-interest expense increased $6.1 million, or 18%, to $40.2 million for the three months ended December 31, 2008 from $34.1 million for the three months ended December 31, 2007. The increase resulted primarily from a combination of an increase in expenses, costs and losses related to holding and disposing of real estate parcels acquired through foreclosure, an increase in Federal insurance premiums and an increase in state franchise tax.
Total assets increased by $89.3 million, or 1%, to $10.88 billion at December 31, 2008 from $10.79 billion at September 30, 2008. The growth in assets consisted primarily of mortgage loans.
Cash and cash equivalents decreased by $40.3 million, or 30%, to $92.0 million at December 31, 2008 from $132.4 million at September 30, 2008, as we continued to redeploy our liquid assets into loan products that provide higher yields along with longer maturities.
Deposits increased $40.6 million, or less than 1%, to $8.30 billion at December 31, 2008 from $8.26 billion at September 30, 2008. This increase can be attributed to an increase in certificates of deposit offset by a decrease in our high yield checking and savings accounts.
Federal Home Loan Bank advances increased $49.5 million, or 10%, to $547.5 at December 31, 2008 from $498.0 million at September 30, 2008. This increase can be attributed to additional cash required to fund the growth of our loan portfolio.
Accrued expenses and other liabilities increased by $50.7 million, or 93%, to $105.2 million at December 31, 2008 from $54.6 million at September 30, 2008. This increase reflects the in-transit status of $49.6 million of real estate tax payments that have been collected from borrowers and will be remitted to various taxing agencies.
Shareholders’ equity decreased $48.8 million, to $1.79 billion at December 31, 2008 from $1.84 billion at September 30, 2008. This reflects $11.5 million of net income during the three-month period reduced by $3.9 million in dividends paid on our shares of common stock (other than the shares held by Third Federal Savings, MHC and unallocated employee stock ownership plan (ESOP) shares) and $60.3 million of repurchases of outstanding common stock during the three-month period. The remainder reflects adjustments related to the allocation of shares of our common stock held by the ESOP. Approximately 4.7 million shares were repurchased during the three months ended December 31, 2008 as part of the completion of two repurchase programs, totaling 20.8 million shares. A third repurchase program of up to 2.2 million additional shares was approved on December 15, 2008. No shares were repurchased under this third program as of December 31, 2008.
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; |
• | 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
(In thousands, except share data)
(unaudited) December 31, 2008 | September 30, 2008 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 45,983 | $ | 57,888 | ||||
Other interest-bearing cash equivalents | 46,055 | 74,491 | ||||||
Cash and Cash equivalents | 92,038 | 132,379 | ||||||
Investment securities | ||||||||
Available for sale (amortized cost $29,576 and $30,861, respectively) | 30,050 | 31,102 | ||||||
Held to maturity (fair value $782,223 and $820,047, respectively) | 778,177 | 817,750 | ||||||
Investment securities | 808,227 | 848,852 | ||||||
Mortgage loans held for sale (includes $156,133 measured at fair value) | 172,171 | 200,670 | ||||||
Loans held for investment, net: | ||||||||
Mortgage loans | 9,470,189 | 9,259,529 | ||||||
Other loans | 8,952 | 7,599 | ||||||
Deferred loan fees, net | (12,959 | ) | (14,596 | ) | ||||
Allowance for loan losses | (48,774 | ) | (43,796 | ) | ||||
Loans, net | 9,417,408 | 9,208,736 | ||||||
Mortgage loan servicing assets, net | 42,721 | 41,526 | ||||||
Federal Home Loans Bank stock, at cost | 35,620 | 35,620 | ||||||
Real estate owned | 15,349 | 14,108 | ||||||
Premises, equipment, and software, net | 67,287 | 68,112 | ||||||
Accrued interest receivable | 43,644 | 46,371 | ||||||
Bank owned life insurance contracts | 152,948 | 151,294 | ||||||
Other assets | 28,341 | 38,783 | ||||||
TOTAL ASSETS | $ | 10,875,754 | $ | 10,786,451 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits | $ | 8,301,659 | $ | 8,261,101 | ||||
Federal Home Loan Bank advances | 547,535 | 498,028 | ||||||
Borrowers’ advances for insurance and taxes | 46,404 | 48,439 | ||||||
Principal, interest, and related escrow owed on loans serviced | 80,105 | 80,675 | ||||||
Accrued expenses and other liabilities | 105,207 | 54,556 | ||||||
Total liabilities | 9,080,910 | 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; 311,518,750 and 316,233,550 outstanding at December 31, 2008 and September 30, 2008, respectively | 3,323 | 3,323 | ||||||
Paid-in capital | 1,674,927 | 1,672,953 | ||||||
Treasury Stock, at cost; 20,800,000 shares at December 31, 2008 and 16,085,200 shares at September 30, 2008, | (252,932 | ) | (192,662 | ) | ||||
Unallocated ESOP shares | (91,959 | ) | (93,545 | ) | ||||
Retained earnings—substantially restricted | 469,808 | 462,190 | ||||||
Accumulated other comprehensive loss | (8,323 | ) | (8,607 | ) | ||||
Total shareholders’ equity | 1,794,844 | 1,843,652 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 10,875,754 | $ | 10,786,451 | ||||
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands except share and per share data)
For the Three Months Ended December 31, | |||||||
2008 | 2007 | ||||||
INTEREST AND DIVIDEND INCOME: | |||||||
Loans, including fees | $ | 121,356 | $ | 123,967 | |||
Investment securities available for sale | 258 | 558 | |||||
Investment securities held to maturity | 9,342 | 11,636 | |||||
Federal funds sold | — | 8,246 | |||||
Other interest earning assets | 448 | 1,261 | |||||
Total interest income | 131,404 | 145,668 | |||||
INTEREST EXPENSE: | |||||||
Deposits | 74,714 | 92,696 | |||||
Federal Home Loan Bank advances | 1,138 | — | |||||
Total interest expense | 75,852 | 92,696 | |||||
NET INTEREST INCOME | 55,552 | 52,972 | |||||
PROVISION FOR LOAN LOSSES | 10,000 | 3,000 | |||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 45,552 | 49,972 | |||||
NON-INTEREST INCOME: | |||||||
Fees and service charges | 6,436 | 6,333 | |||||
Net gain on the sale of loans | 3,078 | 1,199 | |||||
Increase in and death benefits from bank owned life insurance contracts | 1,674 | 1,657 | |||||
Net income (loss) on private equity investments | (1,107 | ) | 1,928 | ||||
Other | 1,850 | 1,816 | |||||
Total non-interest income | 11,931 | 12,933 | |||||
NON-INTEREST EXPENSE | |||||||
Salaries and employee benefits | 20,157 | 18,355 | |||||
Marketing services | 3,525 | 3,525 | |||||
Office property, equipment, and software | 5,353 | 4,519 | |||||
Federal insurance premium | 2,010 | 631 | |||||
State franchise tax | 1,562 | 707 | |||||
Real estate owned expense, net | 1,973 | 743 | |||||
Other operating expenses | 5,639 | 5,623 | |||||
Total non-interest expense | 40,219 | 34,103 | |||||
INCOME BEFORE INCOME TAXES | 17,264 | 28,802 | |||||
INCOME TAX EXPENSE | 5,776 | 9,986 | |||||
NET INCOME | $ | 11,488 | $ | 18,816 | |||
Earnings per share - basic and fully diluted | $ | 0.04 | $ | 0.06 | |||
Weighted average shares outstanding | |||||||
Basic | 303,432,538 | 322,327,418 | |||||
Fully diluted | 303,778,688 | 322,327,418 |
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended December 31, 2008 | Three Months Ended December 31, 2007 | |||||||||||||||||||||
Average Balance | Interest Income/ Expense | (a) Yield/ Cost | Average Balance | Interest Income/ Expense | (a) Yield/ Cost | |||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Federal funds sold | $ | 85 | $ | 0 | 0.85 | % | $ | 709,435 | $ | 8,246 | 4.65 | % | ||||||||||
Other interest-bearing cash equivalents | 1,441 | 7 | 1.94 | % | 52,963 | 657 | 4.96 | % | ||||||||||||||
Investment securities | 17,309 | 128 | 2.96 | % | 60,635 | 599 | 3.95 | % | ||||||||||||||
Mortgage-backed securities | 812,125 | 9,472 | 4.67 | % | 854,689 | 11,595 | 5.43 | % | ||||||||||||||
Loans | 9,539,296 | 121,356 | 5.09 | % | 8,322,205 | 123,967 | 5.96 | % | ||||||||||||||
Federal Home Loan Bank stock | 35,620 | 441 | 4.95 | % | 34,231 | 604 | 7.06 | % | ||||||||||||||
Total interest-earning assets | 10,405,876 | 131,404 | 5.05 | % | 10,034,158 | 145,668 | 5.81 | % | ||||||||||||||
Noninterest-earning assets | 332,720 | 356,325 | ||||||||||||||||||||
Total assets | $ | 10,738,596 | $ | 10,390,483 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,092,378 | 3,945 | 1.44 | % | $ | 1,401,307 | 11,617 | 3.32 | % | ||||||||||||
Savings accounts | 1,142,467 | 5,766 | 2.02 | % | 1,094,998 | 10,887 | 3.98 | % | ||||||||||||||
Certificates of deposit | 6,072,223 | 65,003 | 4.28 | % | 5,683,540 | 70,192 | 4.94 | % | ||||||||||||||
Federal Home Loan Bank advances | 373,998 | 1,138 | 1.22 | % | — | — | — | |||||||||||||||
Total interest-bearing liabilities | 8,681,066 | 75,852 | 3.50 | % | 8,179,845 | 92,696 | 4.53 | % | ||||||||||||||
Noninterest-bearing liabilities | 238,827 | 203,214 | ||||||||||||||||||||
Total liabilities | 8,919,893 | 8,383,059 | ||||||||||||||||||||
Shareholders’ equity | 1,818,703 | 2,007,424 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,738,596 | $ | 10,390,483 | ||||||||||||||||||
Net interest income | $ | 55,552 | $ | 52,972 | ||||||||||||||||||
Interest rate spread (b) | 1.55 | % | 1.28 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,724,810 | $ | 1,854,313 | ||||||||||||||||||
Net interest margin (d) | 2.14 | % | (a) | 2.11 | % | (a) | ||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 119.87 | % | 122.67 | % | ||||||||||||||||||
(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. |