TFS Financial Corp. (TFSL) News

CLEVELAND, May 5, 2010 (GLOBE NEWSWIRE) -- 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.

The TFS Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3622

CONTACT:  Third Federal Savings and Loan
          Jennifer Rosa
            (216) 429-5037
          Monica Martines
            (216) 441-7346