TFS Financial Corporation’s (TFSL) share price moved north by 5.8% following the Sep 26 announcement that the company has received authorization from the Federal Reserve to recommence its stock repurchase program. The green signal from the Fed spells good news for the company, and comes as a respite after the arduous financial restrictions owing to two Memorandums of Understanding (MOU).
The company now appears to have an understandably less-troubled path toward reinstating its dividend, which it last paid in mid-2010. Going forward, these reinstated capital deployment initiatives by the bank are expected to boost investors’ confidence in the stock.
The Ohio-based bank holding company expects to reinstate its share repurchase program after Oct 1, 2013. The share repurchase program has roughly 2.2 million shares of its common stock remaining to be purchased.
In Mar 2009, the aforementioned share repurchase program was approved by TFS Financial’s board of directors. However, the program was suspended in Aug 2010 when a MOU was entered into with the bank’s earlier regulator, the Office of Thrift Supervision (:OTS).
The MOU was signed to lessen its credit risk associated with TFS Financial’s home-equity credit lines and loans. Nearly one-third of the bank’s loan portfolio was concentrated in home equity lines and loans in the states of Ohio and Florida, where the real-estate values were tanking.
Further, the OTS ceased to exist on Oct 19, 2011 after being merged with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (:FDIC), the Federal Reserve Board of Governors, and the Consumer Financial Protection Bureau (:CFPB). This came under the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The MOU is presently under the supervision of the Federal Reserve.
TFS Financial currently carries a Zacks Rank #2 (Buy). Other well-performing stocks in the same sector include Meta Financial Group, Inc. (CASH), Provident Financial Holdings, Inc. (PROV) and West Bancorp., Inc. (WTBA). All these stocks carry a Zacks Rank #1 (Strong Buy).