Exhibit 99.1
| Contact: | Jennifer Rosa | (216) 429-5037 | ||
| Monica Martines | (216) 441-7346 |
For release Wednesday, August 4, 2010
TFS Financial Corporation Announces Fiscal Quarter Ended June 30, 2010 Financial Results
(Cleveland, OH – August 4, 2010) – TFS Financial Corporation (NASDAQ: TFSL) (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland (the “Association”), today announced results for the three and nine month periods ended June 30, 2010. The Company also will not be declaring a cash dividend for the current quarter and has suspended its stock repurchase program.
The Company reported net income of $10.2 million for the three months ended June 30, 2010, compared to net income of $10.0 million for the three months ended June 30, 2009. An increase in the net gain on the sale of loans of $10.3 million during the current quarter, as compared to the quarter ended June 30, 2009, was essentially offset by a $10 million increase in the provision for loan losses in the current quarter, as compared to the quarter ended June 30, 2009. Net income of $22.1 million was reported for the nine months ended June 30, 2010, compared to net income of $27.3 million for the nine months ended June 30, 2009. The decrease was attributable to a $13 million increase in the provision for loan losses in the current nine month period, as compared to the nine months ended June 30, 2009.
The Company recorded a provision for loan losses of $30.0 million for the three months ended June 30, 2010, compared to $20.0 million for the three months ended June 30, 2009. The provision recorded for the quarter ended June 30, 2010 exceeded net charge-offs of $16.0 million, whereas the net charge-offs of $23.8 million exceeded the provision recorded for the three months ended June 30, 2009. The provision for loan losses was $71.0 million for the nine months ended June 30, 2010 compared to $58.0 million for the nine months ended June 30, 2009. The provisions exceeded net charge-offs of $47.8 million and $45.9 million for the nine months ended June 30, 2010 and 2009, respectively. Of the $47.8 million of net charge-offs for the nine months ended June 30, 2010, $35.0 million occurred in the equity loans and lines of credit portfolio. The allowance for loan losses was $118.4 million, or 1.33% of total loans receivable at June 30, 2010, compared to $95.2 million, or 1.02% of total loans receivable at September 30, 2009, and further compared to $55.9 million, or 0.59%, of total loans receivable at June 30, 2009.
Nonperforming loans increased by $34.9 million to $290.7 million, or 3.25% of total loans, at June 30, 2010 from $255.7 million, or 2.73% of total loans, at September 30, 2009, and, further, non-performing loans increased by $52.2 million at June 30, 2010, compared to $238.4 million, or 2.53% of total loans, at June 30, 2009. Of the $34.9 million increase in non-performing loans for the nine months ended June 30, 2010, $30.2 million occurred in the residential, non-Home Today portfolio and $12.0 million occurred in the Home Today portfolio. The Home Today portfolio is an affordable housing program targeted toward low and moderate income home buyers, which totaled $283.2 million at June 30, 2010 and $291.7 million at September 30, 2009. Non-performing construction loans decreased $5.6 million during the nine-month period ended June 30, 2010. Non-performing equity loans and lines of credit decreased $1.7 million during the nine-month period ended June 30, 2010. As of June 30, 2010, our equity loans and lines of credit portfolio was $2.90 billion, compared to $2.98 billion at September 30, 2009.
Total assets increased by $341.4 million, or 3%, to $10.94 billion at June 30, 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 partially offset by a decrease in our loan portfolio.
Cash and cash equivalents increased $642.5 million, or 209%, to $949.6 million at June 30, 2010 from $307.0 million at September 30, 2009, and investment securities increased $64.4 million, or 11%, to $666.2 million at June 30, 2010 from $601.8 million at September 30, 2009. This increase is the result of successful deposit gathering, as well as loan sales which closed during June, 2010.
Other assets increased $42.3 million to $95.5 million at June 30, 2010 from $53.2 million at September 30, 2009. This increase is largely the result of the $44.7 million remaining balance of a $51.9 million prepayment of FDIC deposit insurance assessments made in December, 2009.
Deposits increased $337.7 million, or 4%, to $8.91 billion at June 30, 2010 from $8.57 billion at September 30, 2009.This increase is largely the result of a $337.4 million increase in high-yield savings accounts.
Shareholders’ equity increased $15.7 million to $1.76 billion at June 30, 2010 from $1.75 billion at September 30, 2009. This reflects $22.1 million of net income during the nine-month period reduced by $15.6 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 June 30, 2010. The current repurchase program, which has been suspended, has 2,156,250 shares yet to be purchased as of June 30, 2010.
The Office of Thrift Supervision (the “OTS”) has expressed concerns with the risk concentration and other aspects of the Association’s home equity line of credit portfolio and its administration of that portfolio. In connection with those concerns, the OTS has informed the Company that it must provide the OTS 45 days prior written notice of the Company’s intent to declare and pay cash dividends to its stockholders or repurchase any of its outstanding common stock. The OTS may object to a proposed dividend or stock repurchase within the 45 days notice period. The Association has suspended the origination of all new equity loans and lines of credit and is working diligently to resolve the OTS’ concerns with respect to the home equity line of credit portfolio. The Company does not intend to declare or pay a cash dividend, or to repurchase any of its outstanding common stock until the OTS’ concerns are resolved. Any future payment of dividends or stock repurchases will be decided by the Company’s board of directors, subject to proper OTS notice, if required at that time.
At June 30, 2010¸ the Association was “well capitalized” for regulatory capital purposes, as its tier 1 capital ratio was 18.36% and its total risk based capital was 19.45%, both of which substantially exceed the amounts required for the Association to be considered well capitalized.
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 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)
| June 30, 2010 | September 30, 2009 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 32,546 | $ | 20,823 | ||||
Other interest-bearing cash equivalents | 917,009 | 286,223 | ||||||
Cash and cash equivalents | 949,555 | 307,046 | ||||||
Investment securities: | ||||||||
Available for sale (amortized cost $23,548 and $23,065, respectively) | 23,790 | 23,434 | ||||||
Held to maturity (fair value $653,162 and $587,440, respectively) | 642,376 | 578,331 | ||||||
| 666,166 | 601,765 | |||||||
Mortgage loans held for sale (includes $94,423 and $40,436, measured at fair value, respectively) | 115,853 | 61,170 | ||||||
Loans held for investment, net: | ||||||||
Mortgage loans | 8,883,188 | 9,318,189 | ||||||
Other loans | 7,252 | 7,107 | ||||||
Deferred loan fees, net | (12,835 | ) | (10,463 | ) | ||||
Allowance for loan losses | (118,414 | ) | (95,248 | ) | ||||
Loans, net | 8,759,191 | 9,219,585 | ||||||
Mortgage loan servicing assets, net | 42,291 | 41,375 | ||||||
Federal Home Loan Bank stock, at cost | 35,620 | 35,620 | ||||||
Real estate owned | 14,373 | 17,733 | ||||||
Premises, equipment, and software, net | 62,860 | 65,134 | ||||||
Accrued interest receivable | 36,164 | 38,365 | ||||||
Bank owned life insurance contracts | 162,672 | 157,864 | ||||||
Other assets | 95,457 | 53,183 | ||||||
TOTAL ASSETS | $ | 10,940,202 | $ | 10,598,840 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits | $ | 8,908,209 | $ | 8,570,506 | ||||
Borrowed funds | 70,158 | 70,158 | ||||||
Borrowers’ advances for insurance and taxes | 30,606 | 48,192 | ||||||
Principal, interest, and related escrow owed on loans serviced | 107,955 | 105,719 | ||||||
Accrued expenses and other liabilities | 61,747 | 58,400 | ||||||
Total liabilities | 9,178,675 | 8,852,975 | ||||||
Commitments and contingent liabilities | ||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding | 0 | 0 | ||||||
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 June 30, 2010 and September 30, 2009, respectively | 3,323 | 3,323 | ||||||
Paid-in capital | 1,685,139 | 1,679,000 | ||||||
Treasury Stock, at cost; 24,003,750 and 23,842,350 shares at June 30, 2010 and September 30, 2009, respectively | (289,324 | ) | (287,514 | ) | ||||
Unallocated ESOP shares | (84,022 | ) | (87,896 | ) | ||||
Retained earnings—substantially restricted | 463,399 | 456,875 | ||||||
Accumulated other comprehensive loss | (16,988 | ) | (17,923 | ) | ||||
Total shareholders’ equity | 1,761,527 | 1,745,865 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 10,940,202 | $ | 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 June 30, | For the Nine Months Ended June 30, | ||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
INTEREST AND DIVIDEND INCOME: | |||||||||||||
Loans, including fees | $ | 103,902 | $ | 110,863 | $ | 315,713 | $ | 347,955 | |||||
Investment securities available for sale | 150 | 176 | 416 | 644 | |||||||||
Investment securities held to maturity | 4,674 | 6,374 | 14,639 | 23,256 | |||||||||
Other interest and earnings assets | 664 | 457 | 1,813 | 1,313 | |||||||||
Total interest and dividend income | 109,390 | 117,870 | 332,581 | 373,168 | |||||||||
INTEREST EXPENSE: | |||||||||||||
Deposits | 51,446 | 59,032 | 158,779 | 197,165 | |||||||||
Borrowed funds | 480 | 485 | 1,439 | 2,102 | |||||||||
Total interest expense | 51,926 | 59,517 | 160,218 | 199,267 | |||||||||
NET INTEREST INCOME | 57,464 | 58,353 | 172,363 | 173,901 | |||||||||
PROVISION FOR LOAN LOSSES | 30,000 | 20,000 | 71,000 | 58,000 | |||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 27,464 | 38,353 | 101,363 | 115,901 | |||||||||
NON-INTEREST INCOME | |||||||||||||
Fees and service charges, net of amortization | 5,626 | 4,233 | 16,658 | 15,249 | |||||||||
Mortgage servicing assets recovery (impairment) | 6 | 3,972 | 51 | (2,596 | ) | ||||||||
Net gain on the sale of loans | 19,710 | 9,413 | 25,459 | 28,863 | |||||||||
Increase in and death benefits from bank owned life insurance contracts | 1,623 | 1,646 | 4,820 | 4,917 | |||||||||
Income (loss) on private equity funds | 200 | 542 | 546 | (1,028 | ) | ||||||||
Other | 1,363 | 1,721 | 4,276 | 5,176 | |||||||||
Total non-interest income | 28,528 | 21,527 | 51,810 | 50,581 | |||||||||
NON-INTEREST EXPENSE | |||||||||||||
Salaries and employee benefits | 22,223 | 20,330 | 63,879 | 59,105 | |||||||||
Marketing services | 920 | 900 | 4,971 | 7,952 | |||||||||
Office property, equipment and software | 5,046 | 5,654 | 15,661 | 16,536 | |||||||||
Federal insurance premium | 4,239 | 9,771 | 12,762 | 15,528 | |||||||||
State Franchise tax | 1,329 | 1,211 | 3,709 | 3,988 | |||||||||
Real estate owned expense, net | 1,380 | 1,582 | 4,042 | 5,787 | |||||||||
Other operating expenses | 5,544 | 6,374 | 15,089 | 17,890 | |||||||||
Total non-interest expense | 40,681 | 45,822 | 120,113 | 126,786 | |||||||||
INCOME BEFORE INCOME TAXES | 15,311 | 14,058 | 33,060 | 39,696 | |||||||||
INCOME TAX EXPENSE | 5,074 | 4,022 | 10,975 | 12,411 | |||||||||
NET INCOME | $ | 10,237 | $ | 10,036 | $ | 22,085 | $ | 27,285 | |||||
Earnings per share-basic and fully diluted | $ | 0.03 | $ | 0.03 | $ | 0.07 | $ | 0.09 | |||||
Weighted average shares outstanding | |||||||||||||
Basic | 299,826,025 | 300,245,981 | 299,725,977 | 301,741,110 | |||||||||
Diluted | 300,577,738 | 300,638,781 | 300,335,743 | 302,103,263 | |||||||||
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
| Three Months Ended June 30, 2010 | Three Months Ended June 30, 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 | 550,312 | 269 | 0.20 | % | 171,497 | 62 | 0.14 | % | ||||||||||||||
Investment securities | 18,157 | 97 | 2.14 | % | 18,124 | 111 | 2.45 | % | ||||||||||||||
Mortgage-backed securities | 633,343 | 4,727 | 2.99 | % | 680,675 | 6,439 | 3.78 | % | ||||||||||||||
Loans | 9,344,295 | 103,902 | 4.45 | % | 9,567,973 | 110,863 | 4.63 | % | ||||||||||||||
Federal Home Loan Bank stock | 35,620 | 395 | 4.44 | % | 35,620 | 395 | 4.44 | % | ||||||||||||||
Total interest-earning assets | 10,581,727 | 109,390 | 4.14 | % | 10,473,889 | 117,870 | 4.50 | % | ||||||||||||||
Noninterest-earning assets | 333,853 | 307,035 | ||||||||||||||||||||
Total assets | $ | 10,915,580 | $ | 10,780,924 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 984,609 | 1,403 | 0.57 | % | $ | 1,042,960 | 1,779 | 0.68 | % | ||||||||||||
Savings accounts | 1,514,703 | 3,512 | 0.93 | % | 1,127,302 | 3,497 | 1.24 | % | ||||||||||||||
Certificates of deposit | 6,302,435 | 46,531 | 2.95 | % | 6,248,253 | 53,756 | 3.44 | % | ||||||||||||||
Borrowed funds | 70,009 | 480 | 2.74 | % | 182,293 | 485 | 1.06 | % | ||||||||||||||
Total interest-bearing liabilities | 8,871,756 | 51,926 | 2.34 | % | 8,600,808 | 59,517 | 2.77 | % | ||||||||||||||
Noninterest-bearing liabilities | 271,736 | 392,571 | ||||||||||||||||||||
Total liabilities | 9,143,492 | 8,993,379 | ||||||||||||||||||||
Shareholders’ equity | 1,772,088 | 1,787,545 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,915,580 | $ | 10,780,924 | ||||||||||||||||||
Net interest income | $ | 57,464 | $ | 58,353 | ||||||||||||||||||
Interest rate spread (b) | 1.80 | % | 1.73 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,709,971 | $ | 1,873,081 | ||||||||||||||||||
Net interest margin (d) | 2.17 | %(a) | 2.23 | %(a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 119.27 | % | 121.78 | % | ||||||||||||||||||
| (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, 2010 | Nine Months Ended June 30, 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 | 370,540 | 610 | 0.22 | % | 58,042 | 73 | 0.17 | % | ||||||||||||||
Investment securities | 17,798 | 282 | 2.11 | % | 17,775 | 360 | 2.70 | % | ||||||||||||||
Mortgage-backed securities | 624,969 | 14,773 | 3.15 | % | 753,043 | 23,540 | 4.17 | % | ||||||||||||||
Loans | 9,402,090 | 315,713 | 4.48 | % | 9,626,338 | 347,955 | 4.82 | % | ||||||||||||||
Federal Home Loan Bank stock | 35,620 | 1,203 | 4.50 | % | 35,620 | 1,240 | 4.64 | % | ||||||||||||||
Total interest-earning assets | 10,451,017 | 332,581 | 4.24 | % | 10,490,818 | 373,168 | 4.74 | % | ||||||||||||||
Noninterest-earning assets | 322,810 | 322,585 | ||||||||||||||||||||
Total assets | $ | 10,773,827 | $ | 10,813,403 | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
NOW accounts | $ | 978,889 | 4,410 | 0.60 | % | $ | 1,061,972 | 7,584 | 0.95 | % | ||||||||||||
Savings accounts | 1,398,742 | 10,389 | 0.99 | % | 1,124,485 | 12,743 | 1.51 | % | ||||||||||||||
Certificates of deposit | 6,288,794 | 143,980 | 3.05 | % | 6,153,471 | 176,838 | 3.83 | % | ||||||||||||||
Borrowed funds | 70,009 | 1,439 | 2.74 | % | 346,722 | 2,102 | 0.81 | % | ||||||||||||||
Total interest-bearing liabilities | 8,736,434 | 160,218 | 2.45 | % | 8,686,650 | 199,267 | 3.06 | % | ||||||||||||||
Noninterest-bearing liabilities | 270,281 | 323,682 | ||||||||||||||||||||
Total liabilities | 9,006,715 | 9,010,332 | ||||||||||||||||||||
Shareholders’ equity | 1,767,112 | 1,803,071 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,773,827 | $ | 10,813,403 | ||||||||||||||||||
Net interest income | $ | 172,363 | $ | 173,901 | ||||||||||||||||||
Interest rate spread (b) | 1.79 | % | 1.68 | % | ||||||||||||||||||
Net interest-earning assets (c) | $ | 1,714,583 | $ | 1,804,168 | ||||||||||||||||||
Net interest margin (d) | 2.20 | %(a) | 2.21 | %(a) | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 119.63 | % | 120.77 | % | ||||||||||||||||||
| (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. |