Attached files
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| 8-K - 8-K - TFS Financial CORP | d8k.htm |
 Investor Conference Call
August 4, 2011
Exhibit 99.1 |
 2
Forward-Looking Statements
This presentation 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
portfolio; 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
employment
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 credit
markets; Legislative or regulatory changes that adversely affect our
business; 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;
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);
Changes in consumer spending, borrowing and spending habits;
The impact of the current governmental effort to restructure the U.S. Financial and
regulatory system including coming under the jurisdiction
of new federal regulators;
Inability of third-party providers to perform their obligations to us;
Adverse changes and volatility in real estate markets;
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. |
 3
Organized in 1997 as the mid-tier stock holding company for Third
Federal Savings & Loan Association of Cleveland (“Thrift”), which
was founded in 1938 by Ben and Gerome Stefanski
Completed first step IPO conversion in April 2007
TFSL (NASDAQ)
Financials at 6/30/2011:
Total Assets:
$10.9B
Total Deposits:
$ 8.7B
Shareholders’
Equity:
$ 1.8B
Market Capitalization:
$ 3.0B
As of June 30, 2011, there were 308.4 million shares outstanding, of
which 73.6% were held by the Mutual Holding Company
Overview of TFS Financial Corporation |
 4
Ohio
22 full service branches in Northeast Ohio
4 loan production offices in the Columbus area (Central Ohio)
4 loan production offices in the Cincinnati area (Southwestern Ohio)
Markets of Operation
Florida
Organic, de novo expansion into Florida started in
2000
9 full service branches along the West Coast from
New Port Richey to Naples
8 full-service branches along the East Coast from
Palm Gardens to Hallandale
Source: SNL Financial for market data as of June 30, 2010
Deposits from Company data as of June 30, 2011
Deposits
Market
Market
MSA
Branches
($M)
Share (%)
Rank
Tampa-St.Petersburg-Clearwater, FL
5
1,094
2.21
7
Miami-Fort Lauderdale, FL
8
1,070
0.68
26
Cape Coral-Fort Myers, FL
2
244
2.15
13
North Port-Bradenton-Sarasota, FL
1
251
1.47
15
Naples-Marco Island, FL
1
126
1.12
17
Florida Totals
17
2,785
0.69
23
Deposits
Market
Market
MSA
Branches
($M)
Share (%)
Rank
Cleveland-Elyria-Mentor, OH
19
5,427
11.51
2
Akron, OH
3
490
4.33
8
Ohio Totals
22
5,917
2.79
9 |
 5
Strategic Overview
Our business model is to originate and service first mortgage loans and continue to
service existing home equity loans and lines which we fund with core retail
deposits Thrift continues to offer the Smart Rate adjustable rate mortgage
product to act as an interest-rate
hedge
for
the
balance
sheet,
developed
and
first
introduced
to
the
market
in
July 2010.
First mortgage loans and retail deposits have been generated mainly in our
footprint where
we
have
full
service
branches
and
loan
production
offices.
We
have
expanded
our
reach
with
our
Smart
Rate
adjustable
mortgage
as
a
refinance
tool
in
several
new
states using the same origination and underwriting standards.
Only non-commissioned Third Federal associates are used to gather applications,
underwrite and process the requests to generate mortgage loans and home
equity loans and lines
First
mortgage
originations
continue
to
be
made
using
stringent,
conservative
lending
standards. For first mortgages originated during the current fiscal year, the
average FICO score was 774, and the average LTV was 63%.
Being a low cost provider is a critical strategic advantage
Historically, prudent capital management has supplemented shareholder
returns. Repurchased
24.1
million
of
TFSL
stock
(approximately
23%
of
the
public
float)
since
the
IPO
in April 2007
Dividends of $49 million paid to public common shareholders since IPO
|
 6
Financial Highlights
(Dollars in Thousands)
At, or for the year ended,
9/30/10
9/30/09
9/30/08
6/30/11
3/31/11
6/30/10
Balance Sheet
Assets ($)
11,076,027
10,598,840
10,786,451
10,877,541
10,885,060
10,940,202
Net Loans ($)
9,181,749
9,219,585
9,208,736
9,698,228
9,743,582
8,759,191
Deposits ($)
8,851,941
8,570,506
8,261,101
8,701,896
8,755,942
8,908,209
Common Equity ($)
1,752,897
1,745,865
1,843,652
1,766,387
1,752,982
1,761,527
Balance Sheet Ratios
Loans/ Deposits (%)
103.7
107.6
111.5
111.4
111.3
98.3
TCE / TA (%)
15.8
16.4
17.0
16.2
16.0
16.0
Thrift Only Ratios:
Core Capital Ratio (%)
12.1
12.5
12.1
13.8
13.7
12.4
Tier 1 Risk Based Ratio (%)
18.0
17.3
17.3
20.8
20.3
18.4
Total Risk Based Capital Ratio (%)
19.2
18.2
17.6
22.0
21.6
19.4
Profitability
Net Interest income ($)
227,506
230,075
219,862
63,045
60,901
57,464
Provision for loan losses ($)
(106,000)
(115,000)
(34,500)
(22,500)
(22,500)
(30,000)
Net Interest income after prov for loan losses ($)
121,506
115,075
185,362
40,545
38,401
27,464
Non-interest income ($)
58,638
67,384
47,780
8,759
8,267
28,528
Non-interest expense ($)
(161,933)
(162,388)
(151,447)
(39,552)
(43,975)
(40,861)
Income before income taxes ($)
18,211
20,071
81,695
9,752
2,693
15,311
Income tax benefit (expense) ($)
(6,873)
(5,676)
(27,205)
(3,767)
(469)
(5,074)
Net income ($)
11,338
14,395
54,490
5,985
2,224
10,237
Net interest margin (%)
2.16
2.20
2.18
2.37
2.29
2.17
Non-interest expense to average assets (%)
1.50
1.51
1.45
1.45
1.61
1.49
Asset Quality
NPAs/ Assets (%)
2.7
2.6
1.7
2.4
2.5
2.8
NCOs/ Avg Loans (%)
0.7
0.7
0.2
0.8
0.8
0.7
Reserves/ Loans (%)
1.4
1.0
0.5
1.6
1.5
1.3
Texas Ratio (NPAs & TDRs / TCE & LLR) (%)
21.0
17.4
10.0
19.9
20.5
20.3
At, or for the three months ended, |
 7
Loan and Deposit Balances
*About Home Today:
An affordable housing program targeted toward low and moderate income home buyers
that is designed to teach the essential skills needed for successful
homeownership. Most loans supported by PMI. Cumulative loan originations under
this
program
have
been
less
than
$20
million
over
the
last
three
years.
80% of first mortgages in Ohio
Also service $5.9 billion in loans for
others
No brokered deposits
Average branch has $223 million in deposits
Gross Loan Balances 6/30/2011
70%
3%
26%
1%
Residential non-Home
Today
Residential Home
Today
Equity loans and lines
of credit
Other
Deposit Data 6/30/2011
70%
11%
19%
0%
Certificates of Deposit
Negotiable Order of
Withdrawal
Savings
Accrued Interest |
 8
Capital Position as of June 30, 2011
16.16%
13.82%
20.77%
22.02%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Tangible Common
Equity Ratio (TFSL)
Core Capital Ratio
(Thrift)
Tier 1 Risk-based Ratio
(Thrift)
Total Risk-Based
Capital Ratio (Thrift)
Well Capitalized
6.00%
10.00%
5.00%
TFSL/Thrift |
 9
Loan Delinquencies and Charge-offs
Dollars in millions
Loan
Balances
FYE
FYE
6/30/11
6/30/11
3/31/11
9/30/10
6/30/11
3/31/11
9/30/10
Residential non-Home Today
Ohio and Kentucky
$5,733
1.5%
1.6%
1.9%
$3
$3
$5
Florida
1,255
5.1%
5.2%
5.2%
2
1
7
Total
$6,988
2.1%
2.2%
2.5%
$5
$4
$12
Residential Home Today
Ohio and Kentucky
$257
29.8%
30.3%
34.6%
$2
$1
$5
Florida
11
35.3%
31.3%
31.9%
-0-
-0-
-0-
Total
$268
30.0%
30.3%
34.5%
$2
$1
$5
Home Equity Loans and Lines of Credit
Ohio
$1,011
1.7%
1.8%
2.0%
$2
$2
$7
Florida
729
3.1%
3.4%
4.2%
9
9
33
California
301
1.7%
1.3%
1.5%
1
2
4
Other
519
2.1%
2.2%
2.4%
1
2
5
Total
$2,560
2.2%
2.3%
2.6%
$13
$15
$49
Other
$98
4.7%
5.7%
4.2%
-
-
$2
Overall Total
$9,914
2.9%
3.1%
3.5%
$20
$20
$68
Delinquencies
Quarter-end
Quarter-end
Net Charge Offs |
 10
Adjustable Rate Growth
As of 6/30/2011 booked more
than $1.25 billion in new
adjustable mortgages
New production continues to
be a 50% fixed rate/50%
adjustable rate split
Average credit score of the
ARM production is
775
Average LTV is 62%
Total ARMs of $1.67 billion
represent approximately 23%
of all first mortgages
Expansion of adjustable rate
mortgage refinance offerings
into new states: PA, NJ, IL,
NC
0
10
20
30
40
50
60
70
80
90
100
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Fixed vs. Adjustable Production
Fixed
Adjustable |
 11
Memorandum of Understanding Status
June 30, 2011 update on requirements of the Memorandum of
Understanding from the OTS, received on behalf of Thrift, TFS Financial
Corporation, and Mutual Holding Company on February 7, 2011:
Independent assessment of interest rate and enterprise risk
management –
Third party study complete. New Risk
Committees established at Board and management level
Independent
review
of
management
compensation
–
study
complete
Formal
management
and
director
succession
plans
–
plans
complete
Revisions
to
various
operational
policies
–
ongoing
Continue
home
equity
reduction
plan
–
complete |
 12
Results of completed plan at June 30, 2011:
Commitment
reduction
goal
of
$1
billion
–
actual
reduction
of
$1.05
billion at June 30, 2011
Home
equity
balance
reduction
goal
of
$300
million
–
actual
reduction
of $335.7 million at June 30, 2011
$150 million capital infusion from holding company to Thrift completed
in October, 2010
Continuing to implement expanded line management, account
management and collection processes
Home Equity Lending Reduction Plan |
 Home
Equity Lines of Credit History of Equity Portfolio Exposure
Calculations include only capital at Thrift level and excludes additional capital
maintained at TFSL Home Equity Portfolio and Open Commitments Relative to Thrift Tier 1 (Core)
Plus ALLL 256%
350%
387%
375%
288%
414%
449%
544%
0%
100%
200%
300%
400%
500%
600%
September 30,
2004
September 30,
2005
September 30,
2006
September 30,
2007
September 30,
2008
September 30,
2009
September 30,
2010
June 30, 2011
Equity Reduction Plan target for 12/31/11 was 261% |
 14
Cash Dividends and Stock Repurchases
Under the terms of the MOU, TFS Financial must provide 45 days written
notice and obtain the non-objection of its regulator prior to the Company’s
intent to declare and pay dividends to its stockholders or repurchase any of
its outstanding stock.
The Company understands and shares the view of the importance to
shareholders of dividends and stock repurchases. However, given the new
regulators and oversight, The Federal Reserve and the OCC will need to
review and determine the ability of the company to repurchase stock and
declare dividends moving forward. It is unclear the exact timing of any
decisions with
regard to these steps. The company continues to work diligently to resolve this matter on
behalf of the company and its shareholders. |
 15
Summary
Focus on our core competency of originating high credit quality 1-4
family residential mortgages primarily in our banking footprint,
expanding into new markets with our adjustable rate mortgage loans
TFSL has a strong capital position and flexibility at the holding
company
Working with new regulatory agencies to resolve the MOU and
refocus efforts on returning to shareholder-enhancing activities
Dividends
Share Buybacks |
 16
Investor Conference Call
August 4, 2011
Investor Questions |