TFS Financial Earnings 2020-06-30

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

tfsl-20200630

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 June 30, 2020


☐			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, 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 August 5, 2020, there were 280,149,431 shares of the Registrant’s common stock, par value $0.01 per share, outstanding, of which 227,119,132 shares, or 81.1% 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
	June 30, 2020 and September 30, 2019	4

	Consolidated Statements of Income
	Three and Nine Months Ended June 30, 2020 and 2019	5

	Consolidated Statements of Comprehensive Income
	Three and Nine Months Ended June 30, 2020 and 2019	6

	Consolidated Statements of Shareholders’ Equity
	Three and Nine Months Ended June 30, 2020 and 2019	7

	Consolidated Statements of Cash Flows
	Nine Months Ended June 30, 2020 and 2019	9

	Notes to Unaudited Interim Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	70

Item 4.	Controls and Procedures	74

Part II — OTHER INFORMATION

Item 1.	Legal Proceedings	74

Item 1A.	Risk Factors	74

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	76

Item 4.	Mine Safety Disclosures	76

Item 5.	Other Information	76

Item 6.	Exhibits	76

SIGNATURES			77

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			FHLB: Federal Home Loan Bank
AOCI: Accumulated Other Comprehensive Income			FICO: Financing Corporation
ARM: Adjustable Rate Mortgage			FRB-Cleveland: Federal Reserve Bank of Cleveland
ASC: Accounting Standards Codification			Freddie Mac: Federal Home Loan Mortgage Corporation
ASU: Accounting Standards Update			FRS: Board of Governors of the Federal Reserve System
Association: Third Federal Savings and Loan			GAAP: Generally Accepted Accounting Principles
Association of Cleveland			Ginnie Mae: Government National Mortgage Association
BOLI: Bank Owned Life Insurance			GVA: General Valuation Allowances
CARES Act: Coronavirus Aid, Relief and Economic Security			HPI: Home Price Index
Act			IRR: Interest Rate Risk
CDs: Certificates of Deposit			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
FHFA: Federal Housing Finance Agency

Table of Contents

Item 1. Financial Statements

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except share data)


	June 30, 2020		September 30, 2019
ASSETS
Cash and due from banks	$	32,777	$	31,728
Other interest-earning cash equivalents	296,502		243,415
Cash and cash equivalents	329,279		275,143
Investment securities available for sale (amortized cost $506,734 and $550,605, respectively)	514,330		547,864


Mortgage loans held for sale ($45,231 and $0 measured at fair value, respectively)	51,139		3,666
Loans held for investment, net:
Mortgage loans	13,373,506		13,189,516
Other loans	2,720		3,166
Deferred loan expenses, net	44,776		41,976
Allowance for loan losses	(45,564)		(38,913)
Loans, net	13,375,438		13,195,745
Mortgage loan servicing rights, net	7,656		8,080
Federal Home Loan Bank stock, at cost	136,793		101,858
Real estate owned, net	1,395		2,163
Premises, equipment, and software, net	42,697		61,577
Accrued interest receivable	37,680		40,822
Bank owned life insurance contracts	221,327		217,481
Other assets	117,009		87,957
TOTAL ASSETS	$	14,834,743	$	14,542,356
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	9,230,111	$	8,766,384
Borrowed funds	3,759,148		3,902,981
Borrowers’ advances for insurance and taxes	91,104		103,328
Principal, interest, and related escrow owed on loans serviced	43,193		32,909
Accrued expenses and other liabilities	55,711		40,000
Total liabilities	13,179,267		12,845,602
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; 280,149,431 and 279,962,777 outstanding at June 30, 2020 and September 30, 2019, respectively	3,323		3,323
Paid-in capital	1,741,003		1,734,154
Treasury stock, at cost; 52,169,319 and 52,355,973 shares at June 30, 2020 and September 30, 2019, respectively	(767,655)		(764,589)
Unallocated ESOP shares	(41,167)		(44,417)
Retained earnings—substantially restricted	865,965		837,662
Accumulated other comprehensive loss	(145,993)		(69,379)
Total shareholders’ equity	1,655,476		1,696,754
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,834,743	$	14,542,356

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 Nine Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	106,839	$	115,129	$	337,267	$	341,926
Investment securities available for sale	2,397		3,389		8,172		10,007

Other interest and dividend earning assets	722		2,525		4,097		7,841
Total interest and dividend income	109,958		121,043		349,536		359,774
INTEREST EXPENSE:
Deposits	33,064		37,159		108,863		104,998
Borrowed funds	14,015		18,366		48,571		53,685
Total interest expense	47,079		55,525		157,434		158,683
NET INTEREST INCOME	62,879		65,518		192,102		201,091
PROVISION (CREDIT) FOR LOAN LOSSES	—		(2,000)		3,000		(8,000)
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES	62,879		67,518		189,102		209,091
NON-INTEREST INCOME:
Fees and service charges, net of amortization	2,170		1,773		6,435		5,344
Net gain on the sale of loans	10,844		543		16,907		1,105
Increase in and death benefits from bank owned life insurance contracts	1,559		1,703		5,581		5,124

Other	749		1,064		7,276		3,092
Total non-interest income	15,322		5,083		36,199		14,665
NON-INTEREST EXPENSE:
Salaries and employee benefits	24,940		26,149		78,041		77,665
Marketing services	3,673		6,063		12,163		17,579
Office property, equipment and software	5,877		6,806		18,857		20,053
Federal insurance premium and assessments	2,800		2,669		8,187		7,805
State franchise tax	1,191		1,265		3,514		3,809
Other expenses	6,352		6,916		20,949		21,664
Total non-interest expense	44,833		49,868		141,711		148,575
INCOME BEFORE INCOME TAXES	33,368		22,733		83,590		75,181
INCOME TAX EXPENSE	6,528		4,476		13,851		16,461
NET INCOME	$	26,840	$	18,257	$	69,739	$	58,720
Earnings per share—basic and diluted	$	0.10	$	0.06	$	0.25	$	0.21
Weighted average shares outstanding
Basic	275,956,011		275,384,635		275,789,040		275,373,426
Diluted	277,521,881		277,398,486		277,842,653		277,269,555

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 Nine Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net income	$	26,840	$	18,257	$	69,739	$	58,720
Other comprehensive income (loss), net of tax:
Net change in unrealized gain (losses) on securities available for sale	(4,010)		4,133		8,166		12,611
Net change in cash flow hedges	(11,571)		(36,844)		(86,135)		(82,602)
Net change in defined benefit plan obligation	451		264		1,355		792
Total other comprehensive income (loss)	(15,130)		(32,447)		(76,614)		(69,199)
Total comprehensive income (loss)	$	11,710	$	(14,190)	$	(6,875)	$

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	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	2020-08-27	Other Events
8-K	2020-07-30	Earnings, Officers, Exhibits
8-K	2020-07-30	Other Events
8-K	2020-07-14	Other Events
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	tfslfy20junex311.htm
EX-31.2	tfslfy20junex312.htm
EX-32	tfslfy20junex32.htm

TFSL 10Q Quarterly Report

TFS Financial Earnings 2020-06-30