TFS Financial Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

tfsl-20210331

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________

FORM 10-Q

________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-33390

________________________________________

TFS FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

________________________________________


United States of America		52-2054948
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7007 Broadway Avenue
Cleveland,	Ohio	44105
(Address of Principal Executive Offices)		(Zip Code)

(216) 441-6000

Registrant’s telephone number, including area code:

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

________________________________________

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange in which registered

Common Stock, par value $0.01 per share

TFSL

The NASDAQ Stock Market, LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 4, 2021, there were 280,616,473 shares of the Registrant’s common stock, par value $0.01 per share, outstanding, of which 227,119,132 shares, or 80.9% of the Registrant’s common stock, were held by Third Federal Savings and Loan Association of Cleveland, MHC, the Registrant’s mutual holding company.

Table of Contents

TFS Financial Corporation

INDEX


		Page

	Glossary of Terms	3

PART l – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Statements of Condition
	March 31, 2021 and September 30, 2020	4

	Consolidated Statements of Income
	Three and Six Months Ended March 31, 2021 and 2020	5

	Consolidated Statements of Comprehensive Income
	Three and Six Months Ended March 31, 2021 and 2020	6

	Consolidated Statements of Shareholders’ Equity
	Three and Six Months Ended March 31, 2021 and 2020	7

	Consolidated Statements of Cash Flows
	Six Months Ended March 31, 2021 and 2020	9

	Notes to Unaudited Interim Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	72

Item 4.	Controls and Procedures	75

Part II — OTHER INFORMATION

Item 1.	Legal Proceedings	76

Item 1A.	Risk Factors	76

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

Item 3.	Defaults Upon Senior Securities	76

Item 4.	Mine Safety Disclosures	76

Item 5.	Other Information	76

Item 6.	Exhibits	77

SIGNATURES		78

Table of Contents

GLOSSARY OF TERMS

TFS Financial Corporation provides the following list of acronyms and defined terms as a tool for the reader. The acronyms and defined terms identified below are used throughout the document.


ACT: Tax Cuts and Jobs Act			FHFA: Federal Housing Finance Agency
AOCI: Accumulated Other Comprehensive Income			FHLB: Federal Home Loan Bank
ARM: Adjustable Rate Mortgage			FICO: Financing Corporation
ASC: Accounting Standards Codification			FRB-Cleveland: Federal Reserve Bank of Cleveland
ASU: Accounting Standards Update			Freddie Mac: Federal Home Loan Mortgage Corporation
Association: Third Federal Savings and Loan			FRS: Board of Governors of the Federal Reserve System
Association of Cleveland			GAAP: Generally Accepted Accounting Principles
BOLI: Bank Owned Life Insurance			Ginnie Mae: Government National Mortgage Association
CARES Act: Coronavirus Aid, Relief and Economic Security			GVA: General Valuation Allowances
Act			HPI: Home Price Index
CDs: Certificates of Deposit			IRR: Interest Rate Risk
CECL: Current Expected Credit Losses			IRS: Internal Revenue Service
CFPB: Consumer Financial Protection Bureau			IVA: Individual Valuation Allowance
CLTV: Combined Loan-to-Value			LIHTC: Low Income Housing Tax Credit
Company: TFS Financial Corporation and its			LIP: Loans-in-Process
subsidiaries			LTV: Loan-to-Value
DFA: Dodd-Frank Wall Street Reform and Consumer			MGIC: Mortgage Guaranty Insurance Corporation
Protection Act			OCC: Office of the Comptroller of the Currency
EaR: Earnings at Risk			OCI: Other Comprehensive Income
EPS: Earnings per Share			PMI: Private Mortgage Insurance
ESOP: Third Federal Employee (Associate) Stock			PMIC: PMI Mortgage Insurance Co.
Ownership Plan			REMICs: Real Estate Mortgage Investment Conduits
EVE: Economic Value of Equity			SEC: United States Securities and Exchange Commission
Fannie Mae: Federal National Mortgage Association			TDR: Troubled Debt Restructuring
FASB: Financial Accounting Standards Board			Third Federal Savings, MHC: Third Federal Savings
FDIC: Federal Deposit Insurance Corporation			and Loan Association of Cleveland, MHC

Table of Contents

Item 1. Financial Statements

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except share data)


	March 31, 2021		September 30, 2020
ASSETS
Cash and due from banks	$	23,424	$	25,270
Other interest-earning cash equivalents	641,976		472,763
Cash and cash equivalents	665,400		498,033
Investment securities available for sale (amortized cost $417,365 and $447,384, respectively)	421,021		453,438


Mortgage loans held for sale ($24,509 and $36,078 measured at fair value, respectively)	63,441		36,871
Loans held for investment, net:
Mortgage loans	12,702,473		13,104,959
Other loans	2,482		2,581
Deferred loan expenses, net	44,422		42,459
Allowance for credit losses on loans	(67,749)		(46,937)
Loans, net	12,681,628		13,103,062
Mortgage loan servicing rights, net	8,974		7,860
Federal Home Loan Bank stock, at cost	162,783		136,793
Real estate owned, net	—		185
Premises, equipment, and software, net	39,845		41,594
Accrued interest receivable	33,055		36,634
Bank owned life insurance contracts	294,022		222,919
Other assets	94,615		104,832
TOTAL ASSETS	$	14,464,784	$	14,642,221
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	9,238,411	$	9,225,554
Borrowed funds	3,293,717		3,521,745
Borrowers’ advances for insurance and taxes	94,108		111,536
Principal, interest, and related escrow owed on loans serviced	46,100		45,895
Accrued expenses and other liabilities	88,977		65,638
Total liabilities	12,761,313		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; 280,616,132 and 280,150,006 outstanding at March 31, 2021 and September 30, 2020, respectively	3,323		3,323
Paid-in capital	1,742,681		1,742,714
Treasury stock, at cost; 51,702,618 and 52,168,744 shares at March 31, 2021 and September 30, 2020, respectively	(766,407)		(767,649)
Unallocated ESOP shares	(37,917)		(40,084)
Retained earnings—substantially restricted	849,394		865,514
Accumulated other comprehensive loss	(87,603)		(131,965)
Total shareholders’ equity	1,703,471		1,671,853
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,464,784	$	14,642,221

See accompanying notes to unaudited interim consolidated financial statements.

Table of Contents

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(In thousands, except share and per share data)


	For the Three Months Ended				For the Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	96,175	$	115,203	$	196,301	$	230,428
Investment securities available for sale	966		2,911		1,953		5,775

Other interest and dividend earning assets	814		1,412		1,630		3,375
Total interest and dividend income	97,955		119,526		199,884		239,578
INTEREST EXPENSE:
Deposits	24,545		37,483		52,241		75,799
Borrowed funds	14,999		17,005		30,489		34,556
Total interest expense	39,544		54,488		82,730		110,355
NET INTEREST INCOME	58,411		65,038		117,154		129,223
PROVISION (RELEASE) FOR CREDIT LOSSES	(4,000)		6,000		(6,000)		3,000
NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES	62,411		59,038		123,154		126,223
NON-INTEREST INCOME:
Fees and service charges, net of amortization	2,460		2,119		4,955		4,265
Net gain on the sale of loans	8,911		3,138		25,354		6,063
Increase in and death benefits from bank owned life insurance contracts	3,807		2,461		5,454		4,022

Other	530		1,229		1,406		6,527
Total non-interest income	15,708		8,947		37,169		20,877
NON-INTEREST EXPENSE:
Salaries and employee benefits	26,672		27,216		55,010		53,101
Marketing services	5,325		4,029		11,058		8,490
Office property, equipment and software	6,395		6,534		12,830		12,980
Federal insurance premium and assessments	2,323		2,768		4,713		5,387
State franchise tax	1,159		1,191		2,310		2,323
Other expenses	6,936		7,820		14,618		14,597
Total non-interest expense	48,810		49,558		100,539		96,878
INCOME BEFORE INCOME TAXES	29,309		18,427		59,784		50,222
INCOME TAX EXPENSE	6,300		1,170		11,773		7,323
NET INCOME	$	23,009	$	17,257	$	48,011	$	42,899
Earnings per share—basic and diluted	$	0.08	$	0.06	$	0.17	$	0.15
Weighted average shares outstanding
Basic	276,716,978		275,835,243		276,464,037		275,706,011
Diluted	278,593,303		278,101,329		278,291,638		277,990,253

See accompanying notes to unaudited interim consolidated financial statements.

Table of Contents

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands)


	For the Three Months Ended				For the Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net income	$	23,009	$	17,257	$	48,011	$	42,899
Other comprehensive income (loss), net of tax:
Net change in unrealized gain (losses) on securities available for sale	(485)		9,253		(1,858)		12,176
Net change in cash flow hedges	33,989		(89,769)		45,288		(74,564)
Net change in defined benefit plan obligation	466		452		932		904
Total other comprehensive income (loss)	33,970		(80,064)		44,362		(61,484)
Total comprehensive income (loss)	$	56,979	$	(62,807)	$	92,373	$	(18,585)

See accompanying notes to unaudited interim consolidated financial statements.

Table of Contents

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

(In thousands, except share and per share data)


	For the Three Months Ended March 31, 2020
	Common stock		Paid-in capital		Treasury stock		Unallocated common stock held by ESOP		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2019	$	3,323	$	1,736,322	$	(766,492)	$	(43,334)	$	849,929	$	(50,799)	$	1,728,949
Net income	—		—		—		—		17,257		—		17,257
Other comprehensive income (loss), net of tax	—		—		—		—		—		(80,064)		(80,064)
ESOP shares allocated or committed to be released	—		1,050		—		1,083		—		—		2,133
Compensation costs for equity incentive plans	—		1,160		—		—		—		—		1,160

Purchase of treasury stock (1,000 shares)	—		—		(19)		—		—		—		(19)
Treasury stock allocated to equity incentive plan	—

Price	18.05	EPS	0
Shares	280	P/E	63
MCap	5,053	P/FCF	49
Net Debt	-275	EBIT	323
TEV	4,778	TEV/EBIT	15
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-06
10-Q	2020-12-31	Filed 2021-02-09
10-K	2020-09-30	Filed 2020-11-24
10-Q	2020-06-30	Filed 2020-08-07
10-Q	2020-03-31	Filed 2020-05-15
10-Q	2019-12-31	Filed 2020-02-06
10-K	2019-09-30	Filed 2019-11-26
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-08
10-Q	2018-12-31	Filed 2019-02-07
10-K	2018-09-30	Filed 2018-11-27
10-Q	2018-06-30	Filed 2018-08-07
10-Q	2018-03-31	Filed 2018-05-08
10-Q	2017-12-31	Filed 2018-02-08
10-K	2017-09-30	Filed 2017-11-22
10-Q	2017-06-30	Filed 2017-08-07
10-Q	2017-03-31	Filed 2017-05-05
10-Q	2016-12-31	Filed 2017-02-08
10-K	2016-09-30	Filed 2016-11-23
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-06
10-Q	2015-12-31	Filed 2016-02-08
10-K	2015-09-30	Filed 2015-11-25
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-07
10-Q	2014-12-31	Filed 2015-02-06
10-K	2014-09-30	Filed 2014-11-26
10-Q	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-08
10-Q	2013-12-31	Filed 2014-02-07
10-K	2013-09-30	Filed 2013-11-27
10-Q	2013-06-30	Filed 2013-08-08
10-Q	2013-03-31	Filed 2013-05-09
10-Q	2012-12-31	Filed 2013-02-11
10-K	2012-09-30	Filed 2012-11-29
10-Q	2012-06-30	Filed 2012-08-09
10-Q	2012-03-31	Filed 2012-05-10
10-Q	2011-12-31	Filed 2012-02-09
10-K	2011-09-30	Filed 2011-11-29
10-Q	2011-06-30	Filed 2011-08-09
10-Q	2011-03-31	Filed 2011-05-09
10-Q	2010-12-31	Filed 2011-02-09
10-K	2010-09-30	Filed 2010-11-24
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-06
10-Q	2009-12-31	Filed 2010-02-05

8-K	2020-11-19
8-K	2020-10-29
8-K	2020-08-27
8-K	2020-07-30
8-K	2020-07-30
8-K	2020-07-14
8-K	2020-06-01
8-K	2020-05-28
8-K	2020-05-11
8-K	2020-04-30
8-K	2020-02-27
8-K	2020-02-27
8-K	2020-01-30
8-K	2019-11-21
8-K	2019-10-30
8-K	2019-08-22
8-K	2019-07-30
8-K	2019-07-16
8-K	2019-06-03
8-K	2019-05-30
8-K	2019-04-30
8-K	2019-02-21
8-K	2019-02-21
8-K	2019-01-30
8-K	2018-11-14
8-K	2018-10-29
8-K	2018-09-28
8-K	2018-08-30
8-K	2018-07-30
8-K	2018-07-11
8-K	2018-05-31
8-K	2018-05-29
8-K	2018-04-30
8-K	2018-02-22
8-K	2018-02-22
8-K	2018-01-30

EX-31.1	tfslfy21marex311.htm
EX-31.2	tfslfy21marex312.htm
EX-32	tfslfy21marex32.htm

TFSL 10Q Quarterly Report

TFS Financial Earnings 2021-03-31