TFS Financial (NASDAQ: TFSL) is a bank holding company that operates commercial banking operations in the Midwestern United States. It operates Third Federal Savings and Loan Association of Cleveland, a savings & loans business, and Third Capital, which leases commercial properties, invests in private equity funds, and issues residential mortages. In the wake of the 2008 financial crisis, TFS faces unfamiliar challenges as the credit market remains uncertain and the Dodd-Frank Act changes the financial sector.
In 2010, net income decreased to $11.4 million from $14.4 million in 2009. The primary drivers of this decrease were weak regional credit and real estate markets resulted in a drop in interest income. The company's net income decreased in lockstep with its interest income during 2010, illustrating its reliance on a strong savings & loans market in Ohio.
TFS's primary source of revenue is its lending practice - like any commercial bank, TFS pays customers interest on their deposits so that it can lend out their money at a higher rate. The net interest margin metric acts as proxy for the bank's ability to earn interest on its assets. In the midst of credit market uncertainty following the 2008 Financial crisis, TFS's ability to lend profitably may be reduced and its net interest margin may decrease.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, the government's response to the 2008 Financial crisis, significantly impacts the way the financial sector operates. Its allowance for government support of institutions identified as "too big to fail" may increase the value of identified financial institutions while decreasing the prospects and equity value of smaller financial institutions like TFS. In addition, the Act increases financial regulation which may restrict TFS's operations and increase back office expenses related to compliance.
TFS competes with other commercial banks in the Midwest including competing regional banks and national competitors:
TFS and its competitors increase revenues and income by increasing their deposit and loan volume. The industry is competitive as companies increase their deposit interest rates while decreasing their loan rates and fees to attract customers.
Smack-dab what I was looinkg for-ty!