That’s not really moving in the right direction
It all starts with loans. Their loan book remained steady and their Net Interest Income has gone down in the last 5 years. The net income didn’t suffer due to lower taxes. They are heavy on mortgage, which is okay, but they are also heavy on Home Equity loans, which performs badly in economic downcycle. That’s a risk.
If they end up selling the bank, and manage to get closer to “minority shareholder book value”, that’s like 100% gain. It is sort of family owned, will they sell, do they have a timeline?
If not, I will not buy for dividend alone.
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Hi Kingran, I am not sure they can sell the company when they are still in the middle of the two step process for de-mutualization.
They are in kind of a limbo space. I don’t think they can be bought, even in a hostile take-over because 80% of the stock is “owned” by the customers and employees if they ever do the second step.
Randy
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I sure hope TFSL is buying back shares at these prices. They haven’t done much buying in recent years.
From yesterday’s 10Q: “As of May 5, 2022, there were 280,797,116 shares of the Registrant’s common stock…”
As compared to the Q1 10Q:“As of February 4, 2022, there were 280,850,653 shares of the Registrant’s common stock…”
In other words, they weren’t very busy these last few weeks when the stock was down. I can’t say I’m surprised.
-bakerbenji (long TFSL)
Many here like TFSL, may be I am missing something, what is a single biggest risk for the bank? How are they going to increase earnings to cover dividend, and sustain the dividend growth?
Exactly, Matt. Will the stock at $14 make them more interested?
We will see.
Jim
Jim, Do you know what kind of hit to BV TFSL will take on MTM on their bond portfolio, and Mortgage portfolio? Do you think they will any ability to do buybacks?
Kingran, check out p71 of the latest TFSL 10-Q to get some idea of how much a change in rates affects the situation at TFSL: https://www.sec.gov/ix?doc=/Archives/edgar/data/1381668/0001…
Jim
Oh, and let me also add that they had equity levels that are generally at least twice the level needed to be considered well capitalized. See p68 for that.
Jim
From the 10-Q, 300 basis point increase or 3% increase will decrease the EVE by $563 million or by 36% and from 10-Q…
The table above indicates that at March 31, 2022, in the event of an increase of 200 basis points in all interest rates, the Association would experience a 22.11% decrease in EVE. In the event of a 100 basis point decrease in interest rates, the Association would experience a 10.72% increase in EVE.
Right now, the narrative for banks have shifted from “NII increase due to rate increase” to AOCI hit, i.e., the hit they are going to take on MTM (mark to market) on their assets. Small banks like TFSL will have less sticky deposits or the deposits get rolled to higher yielding instruments quickly.
None of this means TFSL is in distress, but I don’t see a reason to get near them now. On the other hand mega-cap banks like Citi trading at significant discount to TBV and Wells (better franchise, US based bank, much of its regulatory issues behind them, investment to meet the regulatory requirements are going on for the last few years, meaning less expense ahead) is getting closer to 1x TBV.
I generally prefer bigger banks, as they can withstand shock better. Of course YMMV.
At Friday’s closing price, TFSL now has a dividend yield of 7.5%, and it just declared another quarterly dividend of $0.2825 payable on 06/21/22, with an ex-div date of 06/06/2022.
I’m pondering a purchase tomorrow.
David (formerly TMFWysocki)
I’ll be interested to see what they do with the dividend this time around. We should have a filing soon enough.
Jim
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I’ll be interested to see what they do with the dividend this time around.
What are you thinking, Jim?
David
I think we just get the same dividend at best.
Jim
Got it, Jim. Thanks for your reply.
David
I think we just get the same dividend at best.
You nailed it, Jim.
CLEVELAND - June 1, 2022 - TFS Financial Corporation (Nasdaq: TFSL), (the “Company”), the holding company for Third Federal Savings and Loan Association of Cleveland, announced that Third Federal Savings and Loan Association of Cleveland, MHC, (the “MHC”), the mutual holding company that owns 80.9% of the Company’s outstanding common stock, will hold a special meeting of its members. The meeting will include a vote on a proposal to waive the MHC’s right to receive quarterly dividends totaling up to $1.13 per share that may be declared by the Company during the 12-month period following the member vote. All dividends on the Company’s common stock are declared at the discretion of the Company’s Board of Directors. The special meeting will be held on July 12, 2022.
https://www.bamsec.com/filing/138166822000060/2?cik=1381668
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I thought the dividend announcement was issued last week. IN any case, there is a motivated seller. I just now bought 10K shares across multiple accounts and brokers and I am able to get 14.87 to $14.88 fill. That’s like I bought 3% of daily trading volume within a penny tells me there is a motivated seller.
Hi Kingran,
About two weeks ago, you posted this:
Right now, the narrative for banks have shifted from “NII increase due to rate increase” to AOCI hit, i.e., the hit they are going to take on MTM (mark to market) on their assets. Small banks like TFSL will have less sticky deposits or the deposits get rolled to higher yielding instruments quickly.
None of this means TFSL is in distress, but I don’t see a reason to get near them now. On the other hand mega-cap banks like Citi trading at significant discount to TBV and Wells (better franchise, US based bank, much of its regulatory issues behind them, investment to meet the regulatory requirements are going on for the last few years, meaning less expense ahead) is getting closer to 1x TBV.
I generally prefer bigger banks, as they can withstand shock better. Of course YMMV.
Can you share with the group what has changed to motivate you to buy 10K shares? I have been thinking about adding, but so far have held off. Would appreciate any insight into what changed your mind, beyond the comments that Jim has posted here.
Thanks!
Murph
Well, we will now see what the regulator thinks of the dividend.
Jim
These are not forever holding position. It is just harvesting dividend and/ or a bounce above $15. I will be gone. I am carrying 30% cash, and this is still 1% position for me. I recently bought some SPY calls also. Do I believe we have seen the low’s? NO. I am expecting a market bounce and if not, I will take my profit/ loss and move on.
I finally invested in TFSL today at $14.90 putting my dividend yield on cost at 7.58%, which I just could not ignore. That and whatever capital gain I might realize makes TFSL a pretty good dividend income investment.
David