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Extraordinary Associate Effort Drives Business, Supports Customers at TFS Financial Corporation
vendredi 29 janvier 2021, 00:01 , par Digital Pro Sound
CLEVELAND–(BUSINESS WIRE)–TFS Financial Corporation (NASDAQ: TFSL) (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland (the “Association”), today announced results for the quarter ended December 31, 2020.
The Company reported net income of $25.0 million for the quarter ended December 31, 2020, compared to net income of $25.6 million for the quarter ended December 31, 2019. The change included a decrease in net interest income, an increase in other operating expenses and an increase in non-interest income, bolstered by increased net gains on the sale of loans. “At Third Federal, our associates continue to do extraordinary things for our customers during these unprecedented times,” said Chairman and CEO, Marc A. Stefanski. “Our strong loan originations this quarter, and a continued decrease in forbearances, are a testament to our associates’ effort. Their support of our customers and our company are the reason we have been strong, stable and safe since our founding in 1938.” Loan originations, mainly refinances, continued at an active pace. We sold, or committed to sell, $293.5 million of fixed-rate loans and recorded related gains of $16.4 million during the quarter ended December 31, 2020, as we took advantage of high origination levels, low interest rates and attractive Fannie Mae loan sale prices, while also managing our interest rate risk. Net interest income decreased $5.5 million, to $58.7 million for the quarter ended December 31, 2020 from $64.2 million for the quarter ended December 31, 2019. This decrease was primarily due to a 52 basis point reduction in the yield on interest-earning assets, primarily loans, to 2.88% during the quarter ended December 31, 2020 from 3.40% during the quarter ended December 31, 2019, as many borrowers are refinancing to take advantage of the current low interest rate environment. The yield on interest-earning assets was 2.95% for the quarter ended September 30, 2020. The decrease in yield was partially offset by a reduction in the cost of interest-bearing liabilities, which decreased 40 basis points to 1.37% for the quarter ended December 31, 2020 from 1.77% during the quarter ended December 31, 2019. Funding costs were lowered through a reduction in the average balance of borrowed funds, including the early termination of above-market priced FHLB borrowings and their related swap contracts during the quarter ended September 30, 2020, and through the repricing of certificates of deposit, to market rates of interest, as they mature. The interest rate spread for the quarter ended December 31, 2020 was 1.51% compared to 1.63% for the prior year quarter. The net interest margin for the quarter ended December 31, 2020 was 1.66% compared to 1.82% during the quarter ended December 31, 2019. The provision for loan losses was a credit of $2.0 million for the quarter ended December 31, 2020 compared to a credit of $3.0 million for the quarter ended December 31, 2019. On October 1, 2020, the Company adopted the Current Expected Credit Loss (“CECL”) methodology and recognized a $46.2 million increase to the allowance for credit losses, and a related $35.8 million reduction to retained earnings, net of tax. The Company recorded $1.3 million of net loan recoveries for the quarter ended December 31, 2020 compared to $1.4 million of net loan recoveries for the quarter ended December 31, 2019. Gross loan charge-offs were $0.9 million for the quarter ended December 31, 2020 and $1.6 million for the quarter ended December 31, 2019, while loan recoveries were $2.1 million in the current quarter and $3.0 million in the prior year quarter. The allowance for credit losses was $92.3 million, or 0.71% of total loans receivable, at December 31, 2020, including a $22.0 million liability for unfunded commitments. The allowance for loan losses was $46.9 million, or 0.36% of total loans receivable, at September 30, 2020 and $37.3 million, or 0.28% of total loans receivable, at December 31, 2019. Total loan delinquencies remained unchanged at $28.2 million, representing 0.22% of total loans receivable at December 31, 2020 and 0.21% of total loans receivable at September 30, 2020. Non-accrual loans decreased $2.6 million to $50.6 million, or 0.39% of total loans receivable, at December 31, 2020 compared with $53.4 million, or 0.41% of total loans receivable, at September 30, 2020. At December 31, 2020, there were $94.1 million of loans, or 0.73% of total loans receivable, in COVID-19 forbearance plans compared to $165.6 million, or 1.26% of total loans receivable, at September 30, 2020. These forbearance plans allow borrowers experiencing temporary financial hardships related to COVID-19 to defer a limited number of payments to a later point in time and catch up missed payments through a variety of repayment options. In accordance with regulatory guidance and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the delinquency and accrual status of accounts in COVID-19 forbearance plans are generally frozen as of a specific date prior to entering a forbearance plan. The majority of our forbearance plans were current at the measurement dates with interest income accruing throughout the term of their forbearance and, therefore, are not included in reported delinquency or non-accrual totals. Total troubled debt restructurings decreased $4.9 million to $136.4 million at December 31, 2020 from $141.3 million at September 30, 2020. COVID-19 forbearance plans are not generally classified as troubled debt restructurings. Total non-interest income increased by $9.6 million, to $21.5 million for the quarter ended December 31, 2020, from $11.9 million for the quarter ended December 31, 2019. The change included higher net gains on the sale of loans, which increased $13.5 million compared to the prior year period, offset by $4.3 million of net gain that was recognized during the quarter ended December 31, 2019 on the sale of commercial property. During the quarter ended December 31, 2020, $293.5 million of loans were sold or committed for sale at a $16.4 million net gain compared to $208.5 million of loans sold at a $2.9 million net gain during the quarter ended December 31, 2019. Total non-interest expenses increased $4.4 million, to $51.7 million for the quarter ended December 31, 2020, from $47.3 million for the quarter ended December 31, 2019. The increase consisted mainly of a combination of a $2.4 million increase in salaries and employee benefits and a $1.2 million increase in marketing services, related to the timing of when expenses are incurred. The majority of the increase in salaries and benefits was a result of a one-time after-tax bonus of $1,500 to all associates in recognition of their special efforts during this unusual year. Total assets decreased by $69.4 million, or less than 1%, to $14.57 billion at December 31, 2020 from $14.64 billion at September 30, 2020. This change was mainly due to the combination of loan sales and principal repayments on loans exceeding the total of new loan originations and the impact of adopting CECL, offset by an increase in bank owned life insurance contracts. The combination of loans held for investment, net and mortgage loans held for sale decreased $129.1 million, or 1.0%, to $13.01 billion at December 31, 2020 from $13.14 billion at September 30, 2020, mainly as a result of the increased loan sales mentioned above. Residential core mortgage loans, including those held for sale, decreased $42.3 million and the home equity loans and lines of credit portfolio decreased $61.6 million during the quarter. Total first mortgage loan originations were $1.12 billion for the quarter ended December 31, 2020 and $750.6 million for the quarter ended December 31, 2019. The current period mortgage loan originations included 77% refinance transactions, 33% adjustable rate mortgages and 18% fixed-rate mortgages with terms of 10 years or less. Commitments originated for home equity loans and lines of credit were $306.1 million for the quarter ended December 31, 2020 and $349.5 million for the quarter ended December 31, 2019. Total bank owned life insurance contracts increased $71.6 million, to $294.6 million at December 31, 2020, from $222.9 million at September 30, 2020, primarily due to $70 million of additional premiums placed during the quarter. Other assets decreased $5.6 million, or 5.3%, to $99.2 million at December 31, 2020 from $104.8 million at September 30, 2020. This decrease was primarily due to a $4.3 million reduction in margin requirements and receivables on swap contracts and a $1.2 million decrease in prepaid franchise tax. Deposits decreased by $35.0 million, or less than 1%, to $9.19 billion at December 31, 2020 from $9.23 billion at September 30, 2020. The decrease in deposits was the result of a $173.9 million decrease in certificates of deposit (“CDs”), offset by a $64.2 million increase in checking accounts, a $35.3 million increase in money market accounts and a $39.8 million increase in savings accounts during the quarter ended December 31, 2020. Total deposits include $530.4 million and $553.9 million of brokered CDs at December 31, 2020 and September 30, 2020, respectively. Borrowed funds, all from the FHLB, decreased $76.7 million, to $3.44 billion at December 31, 2020 from $3.52 billion at September 30, 2020. This decrease consisted of a $75.0 million decrease in 90 day advances, which were in place to support interest rate swap contracts that matured during the quarter, and a $1.7 million decrease in long term borrowings. Borrowers’ advances for insurance and taxes increased by $30.7 million to $142.2 million at December 31, 2020 from $111.5 million at September 30, 2020. This change primarily reflects the cyclical nature of real estate tax payments that have been collected from borrowers and are in the process of being remitted to various taxing agencies. Accrued expenses and other liabilities increased by $20.7 million to $86.3 million at December 31, 2020 from $65.6 million at September 30, 2020. The change was mainly due to a $22.0 million increase in the liability for off-balance sheet exposures on commitments to originate new loans and undrawn equity lines of credit and construction loan balances upon the October 1, 2020 adoption of CECL, partially offset by a $1.4 million decrease in payables outstanding. Total shareholders’ equity decreased $14.0 million, or 0.8%, to $1.66 billion at December 31, 2020 from $1.67 billion at September 30, 2020. Activity reflects $25.0 million of net income in the current reduced by a $35.8 million provision to the allowance for credit losses, net of tax, upon the October 1, 2020 adoption of CECL, and a quarterly dividend of $14.1 million. Other changes include $10.4 million of unrealized net gain recognized in accumulated other comprehensive income, primarily related to changes in market values and maturities of swap contracts, and a $0.4 million net positive impact related to activity in the Company’s stock compensation and employee stock ownership plans. No shares of the Company’s common stock were repurchased during the quarter ended December 31, 2020. The Company declared and paid a quarterly dividend of $0.28 per share during the quarter ended December 31, 2020. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the “MHC”), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under current Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 14, 2020 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive the receipt of up to a total of $1.12 per share of possible dividends to be declared on the Company’s common stock, including up to $0.56 in dividends during the six months ending June 30, 2021. The MHC has conducted the member vote to approve the dividend waiver each of the past seven years under Federal Reserve regulations and for each of those seven years, approximately 97% of the votes cast were in favor of the waiver. The Association operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At December 31, 2020 all of the Association’s capital ratios substantially exceed the amounts required for the Association to be considered “well capitalized” for regulatory capital purposes. The Association’s Tier 1 leverage ratio was 10.37%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 19.03% and its total capital ratio was 19.62%. Additionally, the Company’s Tier 1 leverage ratio was 12.15%, its Common Equity Tier 1 and Tier 1 ratios were each 22.28% and its total capital ratio was 22.86%. The Association’s current capital ratios reflect the dilutive impact of $55 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2020. Because of its intercompany nature, these dividends had no impact on the Company’s capital ratios or its consolidated statement of condition. Presentation slides as of December 31, 2020 will be available on the Company’s website, www.thirdfederal.com, under the Investor Relations link within the “Recent Presentations” menu, beginning January 29, 2021. The Company will not be hosting a conference call to discuss its operating results. Third Federal Savings and Loan Association is a leading provider of savings and mortgage products, and operates under the values of love, trust, respect, a commitment to excellence and fun. Founded in Cleveland in 1938 as a mutual association by Ben and Gerome Stefanski, Third Federal’s mission is to help people achieve the dream of home ownership and financial security. It became part of a public company in 2007 and celebrated its 80th anniversary in May, 2018. Third Federal, which lends in 25 states and the District of Columbia, is dedicated to serving consumers with competitive rates and outstanding service. Third Federal, an equal housing lender, has 21 full service branches in Northeast Ohio, seven lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of December 31, 2020, the Company’s assets totaled $14.57 billion. 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, among other things: 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 credit losses and charge-offs on loans and off-balance sheet exposures; statements regarding the trends in factors affecting our financial condition and results of operations, including 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 globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected; 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, and changes in estimates of the allowance for credit losses; decreased demand for our products and services and lower revenue and earnings because of a recession or other events; changes in consumer spending, borrowing and savings habits; adverse changes and volatility in the securities markets, credit markets or real estate markets; our ability to manage market risk, credit risk, liquidity risk, reputational risk, and regulatory and compliance risk; our ability to access cost-effective funding; legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board; the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us; 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; our ability to retain key employees; 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 FRS and changes in the level of government support of housing finance; the continuing governmental efforts to restructure the U.S. financial and regulatory system; the ability of the U.S. Government to remain open, function properly and manage federal debt limits; changes in policy and/or assessment rates of taxing authorities that adversely affect us or our customers; changes in accounting and tax estimates; changes in our organization, or compensation and benefit plans and changes in expense trends (including, but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses); the inability of third-party providers to perform their obligations to us; civic unrest; cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems; and the impact of wide-spread pandemic, including COVID-19, on our business and the economy. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. TFS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (unaudited) (In thousands, except share data) December 31,2020 September 30,2020 ASSETS Cash and due from banks $ 29,512 25,270 Other interest-earning cash equivalents 470,408 472,763 Cash and cash equivalents 499,920 498,033 Investment securities available for sale (amortized cost $443,328 and $447,384, respectively) 447,609 453,438 Mortgage loans held for sale ($107,978 and $36,078 measured at fair value, respectively) 111,288 36,871 Loans held for investment, net: Mortgage loans 12,925,023 13,104,959 Other loans 2,637 2,581 Deferred loan expenses, net 42,138 42,459 Allowance for credit losses on loans (70,290) (46,937) Loans, net 12,899,508 13,103,062 Mortgage loan servicing rights, net 8,230 7,860 Federal Home Loan Bank stock, at cost 136,793 136,793 Real estate owned, net 102 185 Premises, equipment, and software, net 40,770 41,594 Accrued interest receivable 34,840 36,634 Bank owned life insurance contracts 294,565 222,919 Other assets 99,208 104,832 TOTAL ASSETS $ 14,572,833 $ 14,642,221 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits 9,190,600 9,225,554 Borrowed funds 3,444,998 3,521,745 Borrowers’ advances for insurance and taxes 142,248 111,536 Principal, interest, and related escrow owed on loans serviced 50,866 45,895 Accrued expenses and other liabilities 86,289 65,638 Total liabilities 12,915,001 12,970,368 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; 280,564,920 and 280,150,006 outstanding at December 31, 2020 and September 30, 2020, respectively 3,323 3,323 Paid-in capital 1,739,178 1,742,714 Treasury stock, at cost; 51,753,830 and 52,168,744 shares at December 31, 2020 and September 30, 2020, respectively (764,774) (767,649) Unallocated ESOP shares (39,000) (40,084) Retained earnings—substantially restricted 840,678 865,514 Accumulated other comprehensive loss (121,573) (131,965) Total shareholders’ equity 1,657,832 1,671,853 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 14,572,833 $ 14,642,221 TFS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except share and per share data) For the Three Months Ended December 31, 2020 2019 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 100,126 $ 115,225 Investment securities available for sale 987 2,864 Other interest and dividend earning assets 816 1,963 Total interest and dividend income 101,929 120,052 INTEREST EXPENSE: Deposits 27,696 38,316 Borrowed funds 15,490 17,551 Total interest expense 43,186 55,867 NET INTEREST INCOME 58,743 64,185 PROVISION FOR CREDIT LOSSES (2,000) (3,000) NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 60,743 67,185 NON-INTEREST INCOME: Fees and service charges, net of amortization 2,495 2,146 Net gain on the sale of loans 16,443 2,925 Increase in and death benefits from bank owned life insurance contracts 1,647 1,561 Other 876 5,298 Total non-interest income 21,461 11,930 NON-INTEREST EXPENSE: Salaries and employee benefits 28,338 25,885 Marketing services 5,733 4,461 Office property, equipment and software 6,435 6,446 Federal insurance premium and assessments 2,390 2,619 State franchise tax 1,151 1,132 Other expenses 7,682 6,777 Total non-interest expense 51,729 47,320 INCOME BEFORE INCOME TAXES 30,475 31,795 INCOME TAX EXPENSE 5,473 6,153 NET INCOME $ 25,002 $ 25,642 Earnings per share—basic and diluted $ 0.09 $ 0.09 Weighted average shares outstanding Basic 276,216,596 275,578,184 Diluted 278,028,072 277,888,588 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended December 31, 2020 December 31, 2019 Average Balance Interest Income/ Expense Yield/ Cost (1) Average Balance Interest Income/ Expense Yield/ Cost (1) (Dollars in thousands) Interest-earning assets: Interest-earning cash equivalents $ 476,589 $ 128 0.11 % $ 229,986 $ 949 1.65 % Mortgage-backed securities 447,544 987 0.88 % 545,729 2,864 2.10 % Loans (2) 13,090,927 100,126 3.06 % 13,241,863 115,225 3.48 % Federal Home Loan Bank stock 136,793 688 2.01 % 101,858 1,014 3.98 % Total interest-earning assets 14,151,853 101,929 2.88 % 14,119,436 120,052 3.40 % Noninterest-earning assets 525,312 489,200 Total assets $ 14,677,165 $ 14,608,636 Interest-bearing liabilities: Checking accounts $ 1,017,811 321 0.13 % $ 867,971 483 0.22 % Savings accounts 1,662,095 914 0.22 % 1,490,074 3,024 0.81 % Certificates of deposit 6,493,523 26,461 1.63 % 6,505,776 34,809 2.14 % Borrowed funds 3,471,593 15,490 1.78 % 3,746,170 17,551 1.87 % Total interest-bearing liabilities 12,645,022 43,186 1.37 % 12,609,991 55,867 1.77 % Noninterest-bearing liabilities
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