TFS Financial (TFSL) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Contact:	Jennifer Rosa	(216) 429-5037
	Monica Martines	(216) 441-7346

For release Wednesday, May 5, 2010

TFS Financial Corporation Announces Fiscal Quarter Ended March 31, 2010 Financial Results

(Cleveland, OH – May 5, 2010) – 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, 2010.

The Company reported net income of $2.9 million for the three months ended March 31, 2010, compared to net income of $5.8 million for the three months ended March 31, 2009. Net income of $11.8 million was reported for the six months ended March 31, 2010, compared to net income of $17.2 million for the six months ended March 31, 2009. The change in net income for both periods is largely the result of a decrease in the net gain on the sale of loans partially offset by a decrease in mortgage servicing assets impairment.

Net interest income decreased $2.4 million, or 4%, to $57.6 million for the three months ended March 31, 2010 from $60.0 million for the three months ended March 31, 2009. Net interest income decreased $649 thousand, or less than 1%, to $114.9 million in the current six-month period compared to the same period of the prior year. Low interest rates have decreased the yield on interest-earning assets, as well as the rate paid on deposits. While net interest income decreased during the quarter, we experienced a slight improvement of our interest rate spread which increased six basis points to 1.83% compared to 1.77% in the same quarter last year. Our net interest margin decreased five basis points to 2.22% compared to 2.27% in the same quarter last year.

The Company recorded a provision for loan losses of $25.0 million for the three months ended March 31, 2010 compared to $28.0 million for the three months ended March 31, 2009. The provisions exceeded net charge-offs of $18.0 million and $17.1 million for the three months ended March 31, 2010 and 2009, respectively. The provision for loan losses was $41.0 million for the six months ended March 31, 2010 compared to $38.0 million for the six months ended March 31, 2009. The provisions exceeded net charge-offs of $31.9 million and $22.1 million for the six months ended March 31, 2010 and 2009, respectively. Of the $31.9 million of net charge-offs for the six months ended March 31, 2010, $23.7 million occurred in the equity loans and lines of credit portfolio. The level of charge-offs in the portfolio is not unexpected. As delinquencies in the 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. The allowance for loan losses was $104.3 million, or 1.12% of total loans receivable at March 31, 2010, compared to $95.2 million, or 1.02% of total loans receivable at September 30, 2009, and further compared to $59.7 million, or 0.64%, of total loans receivable at March 31, 2009. Nonperforming loans increased by $24.5 million to $280.2 million, or 3.01% of total loans, at March 31, 2010 from $255.7 million, or 2.73% of total loans, at September 30, 2009, and, further, non-performing loans increased by $59.1 million at March 31, 2010, compared to $221.1 million, or 2.37% of total loans, at March 31, 2009. Of the $24.5 million increase in non-performing loans for the six months ended March 31, 2010, $18.7 million occurred in the residential, non-Home Today portfolio and $10.2 million occurred in the Home Today portfolio. Non-performing equity loans and lines of credit decreased $146 thousand, or less than 1%, during the six-month period ended March 31, 2010 as a result of $24.1 million of uncollected balances having been charged off against the allowance for loan loss in the current six-month period.

As of March 31, 2010, our equity loans and lines of credit portfolio was $2.94 billion, compared to $2.98 billion at September 30, 2009.

Total assets increased by $138.3 million, or 1.3%, to $10.74 billion at March 31, 2010 from $10.60 billion at September 30, 2009. This change was the result of increases in our cash and cash equivalents, investment securities and other assets offset by a slight decrease in our loan portfolio.

Cash and cash equivalents increased $94.9 million, or 30.9%, to $402.0 million at March 31, 2010 from $307.0 million at September 30, 2009, and investment securities increased $51.8 million, or 8.6%, to $653.6 million at March 31, 2010 from $601.8 million at September 30, 2009.

Other assets increased $51.2 million to $104.3 million at March 31, 2010 from $53.2 million at September 30, 2009, largely as the result of a December 2009, $51.9 million required prepayment of FDIC deposit insurance assessments, which has a remaining balance of $48.3 million at March 31, 2010.

Deposits increased $132.7 million, or 1.5%, to $8.70 billion at March 31, 2010 from $8.57 billion at September 30, 2009.The increase in deposits was the result of a $221.0 million increase in our high-yield savings accounts (a subcategory of our savings accounts) offset by an $82.1 million and $8.5 million decrease in our certificates of deposit and high-yield checking accounts, respectively, for the six-month period ended March 31, 2010.

Shareholders’ equity increased $6.7 million to $1.75 billion at March 31, 2010. This reflects $11.8 million of net income during the six-month period reduced by $10.4 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). The remainder of the change reflects the repurchase of outstanding common stock and adjustments related to the allocation of shares of our common stock related to stock-based compensation awards and the ESOP. No shares of outstanding common stock were repurchased during the three-month period ended March 31, 2010. The current repurchase program has 2,156,250 shares yet to be purchased as of March 31, 2010.

Forward Looking Statements

This report 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 concerning trends in our provision for loan losses and charge-offs;

• 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, including unemployment prospects and conditions, 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 laws or governmental regulations affecting financial institutions, including changes in regulatory costs and capital requirements;

• the timing and the amount of revenue that we may recognize;

• changes in expense trends (including, but not limited to trends affecting non-performing assets, charge-offs and provisions for loan losses);

• the impact of the current governmental effort to restructure the U.S. Financial and regulatory system;

• inability of third-party providers to perform their obligations to us;

• adverse changes and volatility in real estate markets;

• changes in our organization, or 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)

	March 31, 2010			September 30, 2009
ASSETS
Cash and due from banks	$	30,499		$	20,823
Other interest-bearing cash equivalents		371,490			286,223
Cash and cash equivalents		401,989			307,046
Investment securities:
Available for sale (amortized cost $26,601 and $23,065, respectively)		26,853			23,434
Held to maturity (fair value $632,757 and $587,440, respectively)		626,755			578,331
Investment securities		653,608			601,765
Mortgage loans held for sale ($25,081 and $40,436, measured at fair value, respectively)		65,973			61,170
Loans held for investment, net:
Mortgage loans held for investment		9,268,189			9,318,189
Other loans		7,099			7,107
Deferred loan fees, net		(13,469	)		(10,463	)
Allowance for loan losses		(104,305	)		(95,248	)
Loans, net		9,157,514			9,219,585
Mortgage loan servicing assets, net		41,276			41,375
Federal Home Loan Bank stock, at cost		35,620			35,620
Real estate owned		14,228			17,733
Premises, equipment, and software, net		63,979			65,134
Accrued interest receivable		37,600			38,365
Bank owned life insurance contracts		161,049			157,864
Other assets		104,339			53,183
TOTAL ASSETS	$	10,737,175		$	10,598,840
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	8,703,210		$	8,570,506
Borrowed funds		70,163			70,158
Borrowers’ advances for insurance and taxes		43,307			48,192
Principal, interest, and related escrow owed on loans services		111,023			105,719
Accrued expenses and other liabilities		56,935			58,400
Total liabilities		8,984,638			8,852,975
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; 308,315,000 and 308,476,400 outstanding at March 31, 2010 and September 30, 2009, respectively		3,323			3,323
Paid-in capital		1,682,841			1,679,000
Treasury stock, at cost; 24,003,750 and 23,842,350 shares at March 31, 2010 and September 30, 2009		(289,324	)		(287,514	)
Unallocated ESOP shares		(85,345	)		(87,896	)
Retained earnings—substantially restricted		458,363			456,875
Accumulated other comprehensive loss		(17,321	)		(17,923	)
Total shareholders’ equity		1,752,537			1,745,865
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,737,175		$	10,598,840

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,
	2010		2009			2010		2009
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	104,763	$	115,736		$	211,811	$	237,092
Investment securities available for sale		153		210			266		468
Investment securities held to maturity		4,892		7,540			9,965		16,882
Other interest and earnings assets		580		408			1,149		856
Total interest and dividend income		110,388		123,894			223,191		255,298
INTEREST EXPENSE:
Deposits		52,320		63,419			107,333		138,133
Borrowed funds		474		479			959		1,617
Total interest expense		52,794		63,898			108,292		139,750
NET INTEREST INCOME		57,594		59,996			114,899		115,548
PROVISION FOR LOAN LOSSES		25,000		28,000			41,000		38,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		32,594		31,996			73,899		77,548
NON-INTEREST INCOME
Fees and service charges, net of amortization		5,562		4,580			11,032		11,016
Mortgage servicing assets recovery (impairment)		118		(6,566	)		45		(6,568	)
Net gain on the sale of loans		2,708		16,370			5,749		19,450
Increase in and death benefits from bank owned life insurance contracts		1,589		1,597			3,197		3,271
Income (loss) on private equity funds		230		(463	)		346		(1,570	)
Other		1,442		1,605			2,913		3,455
Total non-interest income		11,649		17,123			23,282		29,054
NON-INTEREST EXPENSE
Salaries and employee benefits		20,485		18,618			41,656		38,775
Marketing services		2,026		3,527			4,051		7,052
Office property, equipment and software		5,362		5,529			10,615		10,882
Federal insurance premium		4,314		3,747			8,523		5,757
State Franchise tax		1,338		1,215			2,380		2,777
Real estate owned expense, net		927		2,232			2,662		4,205
Other operating expenses		4,881		5,877			9,545		11,516
Total non-interest expense		39,333		40,745			79,432		80,964
INCOME BEFORE INCOME TAXES		4,910		8,374			17,749		25,638
INCOME TAXES		1,988		2,613			5,901		8,389
NET INCOME	$	2,922	$	5,761		$	11,848	$	17,249
Earnings per share - basic and fully diluted	$	0.01	$	0.02		$	0.04	$	0.06
Weighted average shares outstanding
Basic		299,693,766		301,523,835			299,675,952		302,488,674
Diluted		300,299,201		301,871,344			300,224,745		302,841,190

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS (unaudited)

	Three Months Ended March 31, 2010								Three Months Ended March 31, 2009
	Average Balance			Interest Income/ Expense			Yield/ Cost(a)		Average Balance			Interest Income/ Expense			Yield/ Cost(a)
	(Dollars in thousands)
Interest-earning assets:
Other interest-bearing cash equivalents		281,568			176		0.25	%		1,424			5		1.40	%
Investment securities		18,344			97		2.12	%		17,891			120		2.68	%
Mortgage-backed securities		631,044			4,948		3.14	%		766,330			7,630		3.98	%
Loans		9,407,707			104,763		4.45	%		9,771,745			115,736		4.74	%
Federal Home Loan Bank stock		35,620			404		4.54	%		35,620			403		4.53	%
Total interest-earning assets		10,374,283			110,388		4.26	%		10,593,010			123,894		4.68	%
Noninterest-earning assets		337,305								327,678
		��
Total assets	$	10,711,588							$	10,920,688
Interest-bearing liabilities:
NOW accounts	$	967,333			1,473		0.61	%	$	1,050,578			1,860		0.71	%
Savings accounts		1,397,713			3,479		1.00	%		1,103,687			3,480		1.26	%
Certificates of deposit		6,268,574			47,368		3.02	%		6,139,935			58,079		3.78	%
Borrowed funds		70,011			474		2.71	%		483,272			479		—
Total interest-bearing liabilities		8,703,631			52,794		2.43	%		8,777,472			63,898		2.91	%
Noninterest-bearing liabilities		241,370								340,252
Total liabilities		8,945,001								9,117,724
Shareholders’ equity		1,766,587								1,802,964
Total liabilities and shareholders’ equity	$	10,711,588							$	10,920,688
Net interest income				$	57,594							$	59,996
Interest rate spread (b)							1.83	%							1.77	%
Net interest-earning assets (c)	$	1,670,652							$	1,815,538
Net interest margin (d)					2.22	% (a)							2.27	% (a)
Average interest-earning assets to average interest-bearing liabilities		119.19	%							120.68	%

(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, 2010								Six Months Ended March 31, 2009
	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		0			0		0.00	%		43			0		0.00	%
Other interest-bearing cash equivalents		280,654			340		0.24	%		1,432			11		1.54	%
Investment securities		17,618			185		2.10	%		17,600			249		2.83	%
Mortgage-backed securities		620,783			10,047		3.24	%		789,227			17,101		4.33	%
Loans		9,430,987			211,811		4.49	%		9,655,521			237,092		4.91	%
Federal Home Loan Bank stock		35,620			808		4.54	%		35,620			845		4.74	%
Total interest-earning assets		10,385,662			223,191		4.30	%		10,499,443			255,298		4.86	%
Noninterest-earning assets		317,288								330,199
Total assets	$	10,702,950							$	10,829,599
Interest-bearing liabilities:
NOW accounts	$	976,028			3,008		0.62	%	$	1,071,478			5,805		1.08	%
Savings accounts		1,340,761			6,876		1.03	%		1,123,077			9,246		1.65	%
Certificates of deposit		6,281,974			97,449		3.10	%		6,106,079			123,082		4.03	%
Borrowed funds		70,009			959		2.74	%		428,936			1,617		0.75	%
Total interest-bearing liabilities		8,668,772			108,292		2.50	%		8,729,570			139,750		3.20	%
Noninterest-bearing liabilities		269,554								289,238
Total liabilities		8,938,326								9,018,808
Shareholders’ equity		1,764,624								1,810,834
Total liabilities and shareholders’ equity	$	10,702,950							$	10,829,642
Net interest income				$	114,899							$	115,548
Interest rate spread (b)							1.80	%							1.66	%
Net interest-earning assets (c)	$	1,716,890							$	1,769,873
Net interest margin (d)					2.21	% (a)							2.20	% (a)
Average interest-earning assets to average interest-bearing liabilities		119.81	%							120.27	%

(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.