TFS Financial Corp (TFSL)
F1Q2012 (Qtr End 12/31/2012) Earnings Call
February 2, 2012 04:00 pm ET
Marc Stefanski - President & CEO
Paul Huml - CAO, COO - TFS Financial Corporation
Dave Huffman - CFO
Meredith Weil - CRO
Mike Shafir - Sterne Agee
Joe Stieven - Stieven Capital
Frank Rango - Purchase Capital Management
Mike Godby - FIG Partners
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Today’s call is being recorded and will be available for replay beginning at 6 PM EST. The dial-in number for the replay is 800-283-8217. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. (Operator Instructions) In the interest of time and to get as many questions as possible, we ask that you limit yourself to one question and one follow-up. Lastly, when posing a question, please pick up your handset to allow optimal sound quality.
Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on the management’s current views and assumptions and involve known and unknown risks and uncertainties. It is possible that the company’s actual results and financial condition may differ possibly materially from the anticipated results and financial conditions indicated in these forward-looking statements. For a discussion on some of the risks and important factors that could affect the firm’s future results, see Risk Factors in the company’s latest Annual Report on www.thirdfederal.com. TFS Financial Corporation assumes no obligation to update any forward-looking information provided during the conference call.
It is now my pleasure to turn the floor over to Mr. Marc Stefanski. Sir, you may begin.
Thanks very much and welcome everyone. I would like to at this time turn the phone over to Paul Huml who will just begin with the deck that was made available to all of you. And Paul, go ahead.
Okay, thanks Marc. And thanks everyone for joining us. As Marc mentioned we filed our earnings release yesterday at 4 and along with the copy of the slides that we are going to go over today and at the end we will have time available for questions.
Really just jumping to page 3 of the slides. It is just a summary of where we are as a company at December 31st, very consistent with where we were at September 30, our last fiscal yearend. Total assets $11.1 billion and the shareholders’ equity at $1.8 billion. That is about a little over 16% capital ratio. So very consistent with where we are.
The next slide is just a summary of our strategic overview of what we are doing. And I think as you will see in through some of the slides later, we have traditionally been a fixed rate lender, but based on some of the issues that present itself, whether it be interest rates, some of the regulatory issues with our equity lines of credit, we have introduced an adjustable rate first mortgage product. That’s become more, a big part of what we are doing from a production standpoint. We have had the current quarter, the adjustable rate product with 58% of our first mortgage production which is up from 55% last quarter and 19% a year ago.
So that’s a big step from where we are trying to transition from a total fixed rate lender to more of a variable rate product. Now one of the areas that we have looked at is new state expansion and we’ve started that in mid-2011 and that is continue to expand. We are continuing to learn the best way to approach some of the out-of-state markets. But that will be a big part of what we are doing. We are going to continue to use our Third Federal associates to originate all loans, same credit standards. We’re not buying loans from brokers. They’re all being originated through Third Federal and you can see through the credit scores, 777 of an average FICO score and the loan-to-value average of 61%. So, we have tried to stay from a credit standpoint very high on the scale.
Going to the next page, it is very little change in our markets for operation. Our branches are in Ohio and Florida and that’s where we traditionally received all of our deposits and that has not changed.
Next page, page six, it really goes over the financial highlights and there is just a little different breakout between what we put in the earnings release. But some of the key items is really looking at the loan growth, if we look over where loans were a year ago, September 30, 2011, December 31. Even though we’ve not originated any equity loan products, the first mortgage has more than made up for that and we continue to have growth, a lot of that is from the strong refinance market that’s out there and we’ve also, as you can see maintained very strong capital.
Some of the highlights in the quarter-to-quarter earnings as you will see our provision is down a little bit, 19 million to 15 million as we’ve seen some of our delinquencies come down a little bit. So, that’s a positive trend. Net income is very consistent with where we are at and you will see at the bottom from the asset quality, some big improvements in our non-performing and delinquency numbers which is really driven by one particular factor, the charge-off of some specific valuation allowances that we can get into a little later.