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The Company reported net income of $5.8 million for the three months ended March 31, 2009, compared to net income of $14.8 million for the three months ended March 31, 2008. Net income of $17.2 million was reported for the six months ended March 31, 2009, compared to net income of $33.6 million for the six months ended March 31, 2008. This decrease is attributable mainly to increases in both the provision for loan losses and non-interest expenses, offset by increases in both net interest income and non-interest income in the current quarter.
Net interest income increased $6.9 million, or 13%, to $60.0 million for the three months ended March 31, 2009 from $53.1 million for the three months ended March 31, 2008. The increase in net interest income resulted from a decrease in the interest received on interest-earning assets, offset by a larger decrease in interest paid on interest-bearing liabilities. The interest rate spread increased 44 basis points to 1.77% for the three months ended March 31, 2009 from 1.33% for the three months ended March 31, 2008. Net interest income increased $9.5 million, or 9%, to $115.5 million for the six months ended March 31, 2009 from $106.0 million for the six months ended March 31, 2008.
The Company recorded a provision for loan losses of $28.0 million for the three months ended March 31, 2009 compared to $4.5 million for the three months ended March 31, 2008. The provisions exceeded net charge-offs of $17.1 million and $2.5 million for the three months ended March 31, 2009 and 2008, respectively. The provision for loan losses was $38.0 million for the six months ended March 31, 2009 compared to $7.5 million for the six months ended March 31, 2008. The provisions exceeded net charge-offs of $22.1 million and $4.5 million for the six months ended March 31, 2009 and 2008, respectively. Of the $22.1 million of net charge-offs for the six months ended March 31, 2009, $17.9 million occurred in the equity loans and lines of credit portfolio. As expected under the expanded loan level evaluations which began June 30, 2008, of equity lines of credit delinquent 90 days or more, net charge-offs related to that portfolio have increased as those delinquencies are resolved. The allowance for loan losses was $59.7 million, or 0.64% of total loans receivable at March 31, 2009, compared to $43.8 million, or 0.47% of total loans receivable at September 30, 2008, and further compared to $28.1 million or 0.33% of total loans receivable at March 31, 2008. Nonperforming loans increased by $48.2 million to $221.1 million, or 2.37% of total loans, at March 31, 2009 from $172.9 million, or 1.86% of total loans, at September 30, 2008, and, further, non-performing loans increased by $84.7 million at March 31, 2009, compared to $136.4 million, or 1.59% of total loans, at March 31, 2008. Of the $48.2 million increase in non-performing loans for the six months ended March 31, 2009, $25.9 million occurred in the residential, non-Home Today portfolio and $12.1 million occurred in the equity loans and lines of credit portfolio. As of March 31, 2009, the equity loans and lines of credit portfolio was $2.91 billion, compared to $2.49 billion, at September 30, 2008.
Non-interest income increased $6.3 million, or 58%, to $17.1 million for the three months ended March 31, 2009 from $10.8 million for the three months ended March 31, 2008. The increase primarily resulted from an increase of $15.1 million in net gain on the sale of loans, offset by a $6.6 million mortgage servicing assets impairment and a $2.2 million increase in the amortization expense of the carrying value of our mortgage loan servicing assets. Historically low mortgage loan interest rates have brought about increased refinancing activity resulting in accelerated mortgage loan paydowns, which increases the amount of amortization and expected future prepayment speeds, which reduce the valuation. The increase in net gain on the sale of loans is attributable to $890.0 million of loan sales for the three months ended March 31, 2009, as compared to $250.7 million for the three months ended March 31, 2008. Lower and declining interest rates generally result in higher gains on sales of loans. Loan sales are used as a means of managing interest rate risk.
Non-interest expense increased $4.7 million, or 13%, to $40.7 million for the three months ended March 31, 2009 from $36.0 million for the three months ended March 31, 2008. The increase primarily resulted from a $3.1 million increase in federal insurance premiums, due to increased federal deposit insurance assessment rates, and to a lesser extent, increased deposit balances. Non-interest expense increased $10.8 million, or 15%, to $81.0 million for the six months ended March 31, 2009 from $70.1 million for the six months ended March 31, 2008.
Total assets decreased by $141.6 million, or 1%, to $10.64 billion at March 31, 2009 from $10.79 billion at September 30, 2008. This change consisted primarily in a decrease in cash and cash equivalents combined with a decrease in investment securities.
Cash and cash equivalents decreased $33.8 million, or 26%, to $98.6 million at March 31, 2009 from $132.4 million at September 30, 2008, and investment securities decreased $106.9 million, or 13%, to $742.0 million at March 31, 2009 from $848.9 million at September 30, 2008, as liquid assets were used to fund loan products, pay down borrowings and repurchase common stock.
Deposits increased $118.2 million, or 1%, to $8.38 billion at March 31, 2009 from $8.26 billion at September 30, 2008. The increase in deposits was the result of a $279.6 million increase in certificates of deposit offset by $77.6 million and $85.2 million decreases in high yield checking and savings accounts (other savings accounts and other NOW accounts), respectively, for the six-month period ended March 31, 2009.
Borrowed funds decreased $337.9 million, or 68%, to $160.1 million at March 31, 2009 from $498.0 million at September 30, 2008, mainly through the success of deposit gathering and the use of cash flows from maturing investments and loan sales.
Shareholders' equity decreased $70.9 million, to $1.77 billion at March 31, 2009 from $1.84 billion at September 30, 2008. This reflects $17.2 million of net income during the six-month period reduced by $9.3 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 $85.8 million of repurchases of outstanding common stock during the six-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 the ESOP. Approximately 2.2 million shares were repurchased during the three months ended March 31, 2009, in completing the Company's third repurchase program. A fourth repurchase program of up to 3.3 million additional shares was approved by the board of directors on March 12, 2009. No shares had been repurchased under this fourth program as of March 31, 2009.
The TFS Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3622
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)
---------------------------------------------------------------------
March 31, September 30,
2009 2008
------------- -------------
ASSETS
Cash and due from banks $ 40,848 $ 57,888
Other interest-bearing cash
equivalents 57,747 74,491
------------- -------------
Cash and cash equivalents 98,595 132,379
------------- -------------
Investment securities:
Available for sale (amortized cost
$27,538 and $30,861, respectively) 28,011 31,102
Held to maturity (fair value
$721,074 and $820,047,
respectively) 713,953 817,750
------------- -------------
Investment securities 741,964 848,852
------------- -------------
Mortgage loans held for sale
(includes $184,554 measured at fair
value for the period ended
March 31, 2009) 205,970 200,670
Loans held for investment, net:
Mortgage loans 9,279,368 9,259,529
Other loans 7,759 7,599
Deferred loan fees, net (9,034) (14,596)
Allowance for loan losses (59,717) (43,796)
------------- -------------
Loans, net 9,218,376 9,208,736
------------- -------------
Mortgage loan servicing assets, net 34,873 41,526
Federal Home Loan Bank stock, at cost 35,620 35,620
Real estate owned 13,622 14,108
Premises, equipment, and software,
net 66,667 68,112
Accrued interest receivable 39,398 46,371
Bank owned life insurance contracts 154,550 151,294
Other assets 35,245 38,783
------------- -------------
TOTAL ASSETS $ 10,644,880 $ 10,786,451
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 8,379,331 $ 8,261,101
Borrowed funds 160,093 498,028
Borrowers' advances for insurance
and taxes 40,272 48,439
Principal, interest, and related
escrow owed on loans serviced 233,169 80,675
Accrued expenses and other
liabilities 59,308 54,556
------------- -------------
Total liabilities 8,872,173 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;
309,368,750 and 316,233,550 out-
standing at March 31, 2009 and
September 30, 2008, respectively 3,323 3,323
Paid-in capital 1,676,124 1,672,953
Treasury stock, at cost;
22,950,000 shares at March 31, 2009
and 16,085,200 shares at
September 30, 2008 (277,852) (192,662)
Unallocated ESOP shares (90,864) (93,545)
Retained earnings--substantially
restricted 470,168 462,190
Accumulated other comprehensive loss (8,192) (8,607)
------------- -------------
Total shareholders' equity 1,772,707 1,843,652
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 10,644,880 $ 10,786,451
============= =============
TFS Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share and per share data)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
------------------------- -------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
INTEREST AND
DIVIDEND INCOME:
Loans, including
fees $ 115,736 $ 121,101 $ 237,092 $ 245,068
Investment secur-
ities available
for sale 210 502 468 1,060
Investment secur-
ities held to
maturity 7,540 11,329 16,882 22,965
Federal funds
sold 0 4,980 0 13,226
Other interest
and dividend
earning assets 408 980 856 2,241
------------ ------------ ------------ ------------
Total interest
and dividend
income 123,894 138,892 255,298 284,560
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits 63,419 85,832 138,133 178,528
Borrowed funds 479 -- 1,617 --
------------ ------------ ------------ ------------
Total interest
expense 63,898 85,832 139,750 178,528
------------ ------------ ------------ ------------
NET INTEREST
INCOME 59,996 53,060 115,548 106,032
PROVISION FOR
LOAN LOSSES 28,000 4,500 38,000 7,500
------------ ------------ ------------ ------------
NET INTEREST
INCOME AFTER
PROVISION FOR
LOAN LOSSES 31,996 48,560 77,548 98,532
NON-INTEREST
INCOME
Fees and service
charges, net of
amortization 4,580 6,079 11,016 12,417
Mortgage ser-
vicing assets
impairment (6,566) (29) (6,568) (35)
Net gain on the
sale of loans 16,370 1,254 19,450 2,454
Increase in and
death benefits
from bank owned
life insurance
contracts 1,597 1,605 3,271 3,262
Income (loss) on
private equity
investments (463) 87 (1,570) 2,015
Other 1,605 1,824 3,455 3,640
------------ ------------ ------------ ------------
Total non-
interest
income 17,123 10,820 29,054 23,753
------------ ------------ ------------ ------------
NON-INTEREST
EXPENSE:
Salaries and
employee
benefits 18,618 18,136 38,775 36,491
Marketing
services 3,527 3,528 7,052 7,053
Office property,
equipment, and
software 5,529 4,440 10,882 8,959
Federal insurance
premium 3,747 663 5,757 1,294
State franchise
tax 1,215 1,663 2,777 2,370
Real estate owned
expense, net 2,232 2,036 4,205 2,779
Other operating
expenses 5,877 5,550 11,516 11,173
------------ ------------ ------------ ------------
Total non-
interest
expense 40,745 36,016 80,964 70,119
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 8,374 23,364 25,638 52,166
INCOME TAX
EXPENSE 2,613 8,541 8,389 18,527
------------ ------------ ------------ ------------
NET INCOME $ 5,761 $ 14,823 $ 17,249 $ 33,639
============ ============ ============ ============
Earnings per
share - basic
and fully
diluted $ 0.02 $ 0.05 $ 0.06 $ 0.10
============ ============ ============ ============
Weighted average
shares
outstanding
Basic 301,523,835 322,542,871 302,488,674 322,433,686
Diluted 301,871,344 322,542,871 302,841,190 322,433,686
TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
Three Months Ended
March 31, 2009
-------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
------------- ------------- -------------
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ -- $ -- --
Other interest-bearing cash
equivalents 1,424 5 1.40%
Investment securities 17,891 120 2.68%
Mortgage-backed securities 766,330 7,630 3.98%
Loans 9,771,745 115,736 4.74%
Federal Home Loan Bank
stock 35,620 403 4.53%
------------- -------------
Total interest-earning
assets 10,593,010 123,894 4.68%
------------- -------------
Noninterest-earning assets 327,678
-------------
Total assets $10,920,688
=============
Interest-bearing
liabilities:
NOW accounts $ 1,050,578 1,860 0.71%
Savings accounts 1,103,687 3,480 1.26%
Certificates of deposit 6,139,935 58,079 3.78%
Borrowed funds 483,272 479 0.40%
------------- -------------
Total interest-bearing
liabilities 8,777,472 63,898 2.91%
------------- -------------
Noninterest-bearing
liabilities 340,252
-------------
Total liabilities 9,117,724
Shareholders' equity 1,802,964
-------------
Total liabilities and
shareholders' equity $10,920,688
=============
Net interest income $ 59,996
=============
Interest rate spread (b) 1.77%
=============
Net interest-earning
assets (c) $ 1,815,538
=============
Net interest margin (d) 2.27% (a)
=============
Average interest-earning
assets to average
interest-bearing
liabilities 120.68%
============
Three Months Ended
March 31, 2008
-------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
------------- ------------- -------------
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 605,971 $ 4,980 3.29%
Other interest-bearing cash
equivalents 53,660 532 3.97%
Investment securities 45,294 385 3.40%
Mortgage-backed securities 908,143 11,447 5.04%
Loans 8,448,980 121,101 5.73%
Federal Home Loan Bank
stock 34,236 447 5.22%
------------- -------------
Total interest-earning
assets 10,096,284 138,892 5.50%
------------- -------------
Noninterest-earning assets 345,551
-------------
Total assets $10,441,835
=============
Interest-bearing
liabilities:
NOW accounts $ 1,303,663 8,256 2.53%
Savings accounts 1,268,503 10,322 3.25%
Certificates of deposit 5,660,668 67,254 4.75%
Borrowed funds -- -- --
------------- -------------
Total interest-bearing
liabilities 8,232,834 85,832 4.17%
------------- -------------
Noninterest-bearing
liabilities 183,432
-------------
Total liabilities 8,416,266
Shareholders' equity 2,025,569
-------------
Total liabilities and
shareholders' equity $10,441,835
=============
Net interest income $ 53,060
=============
Interest rate spread
(b) 1.33%
=============
Net interest-earning
assets (c) $ 1,863,450
=============
Net interest margin (d) 2.10% (a)
=============
Average interest-earning
assets to average
interest-bearing
liabilities 122.63%
=============
(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, 2009
-------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
------------- ------------- -------------
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 43 $ 0 0.86%
Other interest-bearing cash
equivalents 1,432 11 1.54%
Investment securities 17,600 249 2.83%
Mortgage-backed securities 789,227 17,101 4.33%
Loans 9,655,521 237,092 4.91%
Federal Home Loan Bank
stock 35,620 845 4.74%
------------- -------------
Total interest-earning
assets 10,499,443 255,298 4.86%
------------- -------------
Noninterest-earning assets 330,199
-------------
Total assets $10,829,642
=============
Interest-bearing
liabilities:
NOW accounts $ 1,071,478 5,805 1.08%
Savings accounts 1,123,077 9,246 1.65%
Certificates of deposit 6,106,079 123,082 4.03%
Borrowed funds 428,936 1,617 0.75%
------------- -------------
Total interest-bearing
liabilities 8,729,570 139,750 3.20%
------------- -------------
Noninterest-bearing
liabilities 289,238
-------------
Total liabilities 9,018,808
Shareholders' equity 1,810,834
-------------
Total liabilities and
shareholders' equity $10,829,642
=============
Net interest income $115,548
=============
Interest rate spread (b) 1.66%
=============
Net interest-earning
assets (c) $ 1,769,873
=============
Net interest margin (d) 2.20% (a)
=============
Average interest-earning
assets to average
interest-bearing
liabilities 120.27%
=============
Six Months Ended
March 31, 2008
-------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Cost(a)
------------- ------------- -------------
(Dollars in thousands)
Interest-earning assets:
Federal funds sold $ 657,703 $ 13,226 4.02%
Other interest-bearing cash
equivalents 53,311 1,190 4.46%
Investment securities 52,965 984 3.72%
Mortgage-backed securities 881,416 23,041 5.23%
Loans 8,385,593 245,068 5.84%
Federal Home Loan Bank
stock 34,233 1,051 6.14%
------------- -------------
Total interest-earning
assets 10,065,221 284,560 5.65%
------------- -------------
Noninterest-earning assets 350,938
-------------
Total assets $10,416,159
=============
Interest-bearing
liabilities:
NOW accounts $ 1,352,485 19,873 2.94%
Savings accounts 1,181,751 21,209 3.59%
Certificates of deposit 5,672,103 137,446 4.85%
Borrowed funds -- -- --
------------- -------------
Total interest-bearing
liabilities 8,206,339 178,528 4.35%
------------- -------------
Noninterest-bearing
liabilities 193,323
-------------
Total liabilities 8,399,662
Shareholders' equity 2,016,497
-------------
Total liabilities and
shareholders' equity $10,416,159
=============
Net interest income $106,032
=============
Interest rate spread (b) 1.30%
=============
Net interest-earning
assets (c) $ 1,858,882
=============
Net interest margin (d) 2.11% (a)
=============
Average interest-earning
assets to average
interest-bearing
liabilities 122.65%
=============
(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.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Third Federal Savings and Loan
Third Federal Savings and Loan
Jennifer Rosa
(216) 429-5037
Monica Martines
(216) 441-7346
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