TFS Financial Corporation

Management did not report full revenue or EPS figures on the call. Paul Huml said provision for loan losses decreased to $2 million for the quarter, net income was staying steady, and net interest margin declined from the prior quarter due to the new funding/investment strategy. He also said the quarter included a little over 2.8 million shares repurchased, with 6.5 million shares still authorized under the board program. Forward-lookingly, management said it expects to begin another MHC dividend-waiver campaign in early summer, and it did not provide margin guidance or payout-ratio guidance.

Marc Stefanski framed the quarter as a continuation of Third Federal’s ongoing strategy: grow the balance sheet, repurchase stock, and pay dividends. He said the firm is comfortable with its unique model, does not favor acquisitions because of culture and credit-risk distractions, and intends to keep repurchasing stock aggressively. His tone was upbeat and defensive of the company’s long-running approach, ending with a note of optimism about the business and a personal thank-you to callers.

Paul Huml focused on the mechanics of the quarter: improving delinquency/loan performance, a reduced $2 million provision for loan losses, and a net interest margin decline caused by adding roughly $1 billion of FHLB advances and investing the proceeds at the Federal Reserve. He said the strategy boosts income with limited risk, and noted the program can be stopped on a day’s notice if it becomes unattractive. On capital deployment, he said the company bought back a little over 2.8 million shares, has 6.5 million shares remaining authorized, and that holding-company cash and capital are more than adequate; he also said the current FHLB rate in Cincinnati is 4% and Fed investment is currently 25 basis points.

Analysts focused on upstreaming cash to the holding company, the MHC dividend waiver, funding/leverage, margin pressure, and housing-market trends. Management said the upstream dividend was strictly earnings-based, that holding-company capital is more than adequate, and that it may seek to move some of the $150 million previously contributed to the thrift back up with regulatory approval. On the waiver, Marc Stefanski said the annual process is onerous and the company will try for a longer term, ideally three to five years, with a new campaign starting in early summer.