TFS Financial Shares Dip on In-Line Earnings - Analyst Blog

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Shares of TFS Financial Corp. ( TFSL ) 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 $16.0 million.

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 $72.0 million.

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 expense.

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%.

Credit Quality

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 quarter.

Share Repurchase

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. 's ( WAFD ) fiscal first-quarter 2014 earnings beat the Zacks Consensus Estimate while People's United Financial Inc. ( PBCT ) and First Niagara Financial Group Inc. ( FNFG ) reported earnings that were in line with the Zacks Consensus Estimate.

Our Viewpoint

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).



FIRST NIAGARA (FNFG): Free Stock Analysis Report

PEOPLES UTD FIN (PBCT): Free Stock Analysis Report

TFS FINANCIAL (TFSL): Free Stock Analysis Report

WASH FEDL INC (WAFD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: FNFG , PBCT , TFSL , WAFD

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