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TFS Financial Corporation Announces Fourth Quarter and Year Ended September 30, 2008 Financial Results
- Press Release
- Source: Third Federal Savings and Loan
- On Tuesday November 25, 2008, 4:28 pm EST
CLEVELAND, Ohio, Nov. 25, 2008 (GLOBE NEWSWIRE) -- TFS Financial Corporation (NasdaqGS:TFSL - News) (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.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| TFSL | 10.83 | +0.44 |
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, September 30,
2008 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 For the Fiscal Year
Ended September 30, 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 Year Ended
September 30, 2008 September 30, 2007
-------------------------- --------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense 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.
Contact:
TFS Financial Corporation
Monica Martines
(216) 441-7346
Cell: (216) 533-3751
Jennifer Rosa
(216) 429-5037
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