TFS Financial Corp.
) fell 0.3% on Friday after the company reported fiscal
first-quarter 2014 earnings (ended Dec 31) on Jan 30 after market
close. Earnings per share of 5 cents were in line with the Zacks
Consensus Estimate. The bottom line compared favorably with the
year-ago figure of 4 cents.
A continuous decline in provision for loan losses, improvement in
asset quality and strong capital ratios were the positives for
the quarter. However, a fall in the top line and marginally
higher operating expenses were the headwinds.
Net income in the reported quarter grew 43.7% year over year to
Performance in Detail
Total revenue was $98.1 million, down 8.3% from the prior-year
quarter. However, it outpaced the Zacks Consensus Estimate of
Net interest income dropped 0.9% from the year-ago quarter to
$67.8 million. The decrease was primarily due to a fall in
interest and dividend income, partially offset by lower interest
Further, non-interest income declined 38.4% year over year to
$5.1 million. The decline was mainly due to a lower net gain on
the sale of loans and other income.
Operating expenses were $42.9 million, up 0.8% from the year-ago
quarter. The rise was primarily due to higher salaries and
employee benefit costs and marketing expenses, partly offset by a
decrease in federal insurance premium and assessments costs and
other operating expenditure.
TFS Financial's capital ratios were well above the regulatory
requirement. As of Dec 31, 2013, Tier 1 risk-based capital ratio
was 21.89%. Total risk-based capital came in at 23.11%.
In the said quarter, credit quality continued to improve with TFS
Financial reporting provision for loan losses of $6.0 million,
down 66.7% from the year-ago quarter. Moreover, net loan
charge-offs came in at $13.3 million, in line with the prior-year
Following the approval of the Federal Reserve, TFS Financial
completed its fourth stock repurchase program. The company
repurchased approximately 2.2 million shares for $26.1 million.
Performance of Other Banks
Among other companies in the same industry,
Washington Federal Inc.
) fiscal first-quarter 2014 earnings beat the Zacks Consensus
People's United Financial Inc.
First Niagara Financial Group Inc.
) reported earnings that were in line with the Zacks Consensus
We expect TFS Financial's renewed capital deployment initiatives
to boost investors' confidence in the stock. Moreover, a
continuous improvement in credit quality and decent capital
ratios bode well for the company.
On the other hand, a still low interest rate scenario and
protracted economic recovery continue to drag the top line. Also,
stringent regulations remain a cause of concern.
At present, TFS Financial carries a Zacks Rank #3 (Hold).
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