Exhibit 99.1
Contact: | Jennifer Rosa (216) 429-5037 | |
Monica Martines (216) 441-7346 |
For release Wednesday, August 5, 2009
TFS Financial Corporation Announces Fiscal Quarter Ended June 30, 2009 Financial Results
(Cleveland, OH – August 5, 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 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.
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, 2009 | September 30, 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 | ||||
See accompanying notes to unaudited interim consolidated financial statements.
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (unaudited)
(In thousands, except share and per share data)
For the Three Months Ended June 30, | For the Nine Months 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 | Three Months Ended June 30, 2008 | |||||||||||||||||||||
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 | $ | 1,600 | $ | 1 | 0.25 | % | $ | 231,237 | $ | 1,254 | 2.17 | % | ||||||||||
Other interest-bearing cash equivalents | 169,897 | 61 | 0.14 | % | 53,258 | 331 | 2.49 | % | ||||||||||||||
Investment securities | 18,124 | 111 | 2.45 | % | 28,987 | 222 | 3.06 | % | ||||||||||||||
Mortgage-backed securities | 680,675 | 6,439 | 3.78 | % | 915,114 | 10,638 | 4.65 | % | ||||||||||||||
Loans | 9,567,973 | 110,863 | 4.63 | % | 8,808,113 | 118,645 | 5.39 | % | ||||||||||||||
Federal Home Loan Bank stock | 35,620 | 395 | 4.44 | % | 34,683 | 474 | 5.47 | % | ||||||||||||||
Total interest-earning assets | 10,473,889 | 117,870 | 4.50 | % | 10,071,392 | 131,564 | 5.23 | % | ||||||||||||||
Non-interest-earning assets | 307,035 | 341,596 | ||||||||||||||||||||
Total assets | $ | 10,780,924 | $ | 10,412,988 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,042,960 | 1,779 | 0.68 | % | $ | 1,266,661 | 5,974 | 1.89 | % | ||||||||||||
Passbook savings | 1,127,302 | 3,497 | 1.24 | % | 1,411,285 | 8,647 | 2.45 | % | ||||||||||||||
Certificates of deposit | 6,248,253 | 53,756 | 3.44 | % | 5,481,524 | 60,623 | 4.42 | % | ||||||||||||||
Borrowed funds | 182,293 | 485 | 1.06 | % | 3,570 | 19 | 2.13 | % | ||||||||||||||
Total interest-bearing liabilities | 8,600,808 | 59,517 | 2.77 | % | 8,163,040 | 75,263 | 3.69 | % | ||||||||||||||
Non-interest-bearing liabilities | 392,571 | 235,368 | ||||||||||||||||||||
Total liabilities | 8,993,379 | 8,398,408 | ||||||||||||||||||||
Shareholders’ equity | 1,787,545 | 2,014,580 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,780,924 | $ | 10,412,988 | ||||||||||||||||||
Net interest income | $ | 58,353 | $ | 56,301 | ||||||||||||||||||
Interest rate spread (b) | 1.73 | % | 1.54 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,873,081 | $ | 1,908,352 | ||||||||||||||||||
Net interest margin (d) | 2.23 | %(a) | 2.24 | %(a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 121.78 | % | 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 | Nine Months Ended June 30, 2008 | |||||||||||||||||||||
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 | $ | 455 | $ | 1 | 0.29 | % | $ | 515,548 | $ | 14,480 | 3.74 | % | ||||||||||
Other interest-bearing cash equivalents | 57,587 | 72 | 0.17 | % | 53,294 | 1,522 | 3.81 | % | ||||||||||||||
Investment securities | 17,775 | 360 | 2.70 | % | 44,972 | 1,205 | 3.57 | % | ||||||||||||||
Mortgage-backed securities | 753,043 | 23,540 | 4.17 | % | 892,649 | 33,679 | 5.03 | % | ||||||||||||||
Loans | 9,626,338 | 347,955 | 4.82 | % | 8,526,432 | 363,713 | 5.69 | % | ||||||||||||||
Federal Home Loan Bank stock | 35,620 | 1,240 | 4.64 | % | 34,383 | 1,525 | 5.91 | % | ||||||||||||||
Total interest-earning assets | 10,490,818 | 373,168 | 4.74 | % | 10,067,278 | 416,124 | 5.51 | % | ||||||||||||||
Non-interest-earning assets | 322,585 | 347,824 | ||||||||||||||||||||
Total assets | $ | 10,813,403 | $ | 10,415,102 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 1,061,972 | 7,584 | 0.95 | % | $ | 1,323,877 | 25,847 | 2.60 | % | ||||||||||||
Passbook savings | 1,124,485 | 12,743 | 1.51 | % | 1,258,262 | 29,856 | 3.16 | % | ||||||||||||||
Certificates of deposit | 6,153,471 | 176,838 | 3.83 | % | 5,608,577 | 198,069 | 4.71 | % | ||||||||||||||
Borrowed funds | 346,722 | 2,102 | 0.81 | % | 1,190 | 19 | 2.13 | % | ||||||||||||||
Total interest-bearing liabilities | 8,686,650 | 199,267 | 3.06 | % | 8,191,906 | 253,791 | 4.13 | % | ||||||||||||||
Non-interest-bearing liabilities | 323,682 | 207,338 | ||||||||||||||||||||
Total liabilities | 9,010,332 | 8,399,244 | ||||||||||||||||||||
Shareholders’ equity | 1,803,071 | 2,015,858 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,813,403 | $ | 10,415,102 | ||||||||||||||||||
Net interest income | $ | 173,901 | $ | 162,333 | ||||||||||||||||||
Interest rate spread (b) | 1.68 | % | 1.38 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,804,168 | $ | 1,875,372 | ||||||||||||||||||
Net interest margin (d) | 2.21 | %(a) | 2.15 | %(a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 120.77 | % | 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. |