Welcome to TFS Financial Corporation's Third Fiscal Quarter Earnings Conference Call and Webcast. Hosting the call today from TFS Financial is Mr. Marc Stefanski, Chief Executive Officer. He is joined by Mr. Dave Huffman, Chief Financial Officer; Mr. John Ringenbach, Chief Operating Officer of Third Federal Savings; Ms. Meredith Weil, Chief Retail Officer of Third Federal Savings; and Mr. Paul Huml, Chief Accounting Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p.m. Eastern Standard Time. The dial-in number for the replay is (800) 677-6124. [Operator Instructions] 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 condition indicated in these forward-looking statements. For a discussion of 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 statements provided during the conference call. It is now my pleasure to turn the floor over to Mr. Marc Stefanski. Sir, you may begin.

Good morning, everyone, and thank you, Beth. I would like to immediately turn the floor over to Paul Huml, who will go over the highlights that we've compiled in the deck that some or most of you or all of you may have received. And then we'll open it up for questions and comments. So Paul, if you want to jump in and begin the presentation?

Okay. Thanks, Marc. Just want to get started. The slides that are out there, you can move through the slides and view whatever ones you want. I'm going to try to go through and just sort of hit some of the highlights, not intending to go over everything on every slide. So then we'll have time for questions at the end. Going in to Slide 3, just a little background information on Third Federal and TFS Financial. We completed our IPO in April of 2007. We trade on NASDAQ. Total assets at June 30, around $11 billion. Shareholders' equity is about a little over 16%, and we are a mutual holding company. So while there's 308 million shares outstanding, the Mutual Holding Company owns 227 million of those. So there's a little over 81 million that's actually traded on the public markets. Just a little -- on Page 4, just a little background on our operation. Started in Ohio, but we also have 17 branches in Florida that were all started de novo, that we've started from scratch. Branch sizes, average about $223 million per branch. So going over to Page 5, just a strategic overview, our business model is basically first mortgages for residential customers. I mean, that's what we've done. We continue to stress the conservative underwriting as part of our approach to -- with the equity lines of credit to GAAP we have reduced by the regulators. We have gone into a adjustable rate, a smart rate program that we started in July 2010. So we -- 2010, so we continue to push that. We've also started to look at doing some refinancings with that product in other states, kind of a new product that we're pushing out. Just to stress, all of our loans are originated…

[Operator Instructions] Our first question comes from Daniel Arnold with Sandler O'Neill. Daniel Arnold - Sandler O'Neill + Partners, L.P.: So I guess my first question is just, I guess, on the MOU here. And I wanted to see if you guys have had -- started conversations with your new regulators and what they kind of -- if they have indicated what the process would be from here in getting this lessened, if there are any additional steps that they indicated they wanted you to take? Or if it's now just a matter of them reviewing the existing MOU that's in place and seeing if that makes sense?

We have a meeting scheduled with the Fed, actually, next week. But we have not engaged in any formal discussion with either one of the regulators on our position as far as the MOU or the buybacks or the dividends. So that's up-and-coming. We've talked casually with them, and we've had discussions, of course, since we first started this process way back in February. But as you know, in a regulatory environment, the official baton wasn't handed off until July 21, and that's when their actual process begins in terms of the analysis of our company or any other company that's involved in the transition. Daniel Arnold - Sandler O'Neill + Partners, L.P.: And I mean, those conversations next week, is that part of a formal exam? Or is that just kind of an introductory meeting?

No, I think that it's not part of a formal exam. I think that the Fed, along with the OCC, is still trying to determine the order in which they're going to organize the processes moving forward, along with the people. And so next week, we'll be meeting with the folks that will be our new regulatory line of command from the Fed's perspective. And -- but yes, I mean, that's when the more formal talks will begin about where we stand and if we stand at all in terms of anything that's done, that's been said and done with the policymakers in D.C. Daniel Arnold - Sandler O'Neill + Partners, L.P.: Great. And then just as it relates to once this MOU gets listed and you guys are able to buy back stock and pay dividends, how do you guys balance those 2? And what -- with the stock trading where it's at right now, what do you think is the more effective use of capital right now? And how aggressive are you going to be on both ends?

Well, actually, our growth strategy, as Paul mentioned, is a 3-tiered approach. It's growing the balance sheet, along with buying back stock and paying dividends. So we, hopefully, will be doing all those things in the very near future. Daniel Arnold - Sandler O'Neill + Partners, L.P.: Okay, but you don't have a preference for one of those right now? Or that, I guess, will depend on where things are at?

Yes, it really does depend where things are at. And we're prepared. If we're not able to pay dividends, which we don't know at this point, then we're prepared to continue the buyback program, if that's allowed as we move forward. Daniel Arnold - Sandler O'Neill + Partners, L.P.: Okay. And then, I guess, last question. Just as you guys look at your capital level, obviously the complexion of the balance sheet right now is a lot different than it was even a few quarters ago, just given the home equity exposure and the addition of first-lien mortgages. Does that affect what you guys think is kind of a normal operating capital level in that the risk on the balance sheet is actually lower? Do think you can operate a kind of lower normalized capital level than you could before? Or how do you feel about that? And what is kind of a normalized capital level in your guys' minds?

This is Dave Huffman. I think it's always relative to where we are in different cycles. You mentioned that it's less risky than we were a few quarters ago, but if we went back a year ago, we had almost $1 billion in cash. So from that standpoint, we have to be sensitive to where we are in different cycles. We hope we're coming out of the delinquency troughs and that we'll see a continued improvement on that score. And to the extent that improves, that might imply that we need a little bit less capital. As you'll recall, when we had the IPO, we probably raised more than we expected when we started the process. And our capital levels were very high. And we started the program to reduce those, and as both Marc and Paul have indicated, it's a 3-pronged attack. And I think that we would intend to leverage the balance sheet a little bit more. But when we look back 2 years ago at the level of capital that we have, that's been kind of a saving grace for us because the capital level is so strong that it really takes out of the equation, in our mind anyway, the risk of a more severe environment that we can weather through things as we've done. And it's almost circumstantial. So we'll just have to see where we are at the point in time and see what the risk profiles look like.

Our next question comes from Paul Miller with FBR Capital Markets. Jessica Ribner - FBR Capital Markets & Co.: This is Jessica Ribner for Paul. Just one question. You're looking to expand your 1-to-4-family mortgage business out of footprint as well?

Yes, that's correct.

And so what's your strategy for that? And where would that be?

Meredith?

This is Meredith Weil. We are currently expanded into Pennsylvania, New Jersey, Illinois and North Carolina. We're using a very similar strategy to our equity strategy when we expanded our equity business out of state. We've been doing direct mail and using Internet advertising to drive business through our customer service center and our Internet channels.

Okay. Just one more question if you don't mind. Are you guys seeing a lot of competition within footprint and even on the -- at your marketing strategy out of footprint? Have you seen increased pricing competition or anything like that?

I think the competition is consistent with how it's been in the past. I think that the broker market has definitely changed a little bit. But because rates are so low, I think, that really, there is definitely rate competition out there. I think we've seen some success in our new space. It is too early to really tell. We really expanded at the end of May, so our results are still preliminary. But we've been able to really get out there and have interest, even though we don't have a big brand presence in those new states.

Our next question comes from Mike Shafir with Sterne Agee. Mike Shafir - Sterne Agee & Leach Inc.: I was just wondering real quick on a housekeeping question. What's a good tax rate to use moving forward?

This is Dave Huffman. If you can tell me what our earnings are, I can give you a great tax rate. We do have the -- our biggest permanent difference item is our bank-owned life insurance, the BOLI program, and we have a little over $165 million in that. And the income from that creates the biggest tax difference. So if that income is in the $5 million or $6 million range, I would just adjust your estimated pre-tax earnings by that. Does that help you? Mike Shafir - Sterne Agee & Leach Inc.: Yes, that sounds good. And then just as we think about kind of the balance sheet and what's gone on so far on the credit side, non-accruals have come in the last couple of quarters, and your charge-offs have remained relatively flat. And it seems like things are starting to stabilize a little bit. So the bulk of those charge-offs have come in that home equity portfolio, and with the big reduction that you guys have had, could we potentially start to see charge-offs a little bit lower over the next couple of quarters?

This is John Ringenbach. I can try to help with that. I think the biggest concern we have, and there has been some positive trends both in delinquencies and in the charge-offs, but the biggest concern we have continues to be the employment situation. That's where most of our challenges are. Our special servicing group goes up, which does the modification for mortgages, is still very busy. Our collection team is still working diligently with customers, and the thing they see the most is folks who are underemployed or lose their employment. It's just a challenge. And I think if we see some improve in the economy, some improvement in employment, we'd feel better about things. But right now, it's not immediately obvious if that's happening.

One thing I want to add on that on the charge-offs is really, from a specific reserve standpoint, that's part of our allowance, which could impact the level of charge-offs. Under the OTS, they have a specific reserve that can be included in your allowance. The OCC does not have that total view. So I think there is a potential that some of those specific reserves turn into charge-offs as we head into a new regulatory world. So that won't really impact what we're doing from a P&L standpoint and provision, but it can impact the level of charge-offs. Mike Shafir - Sterne Agee & Leach Inc.: Okay. And then I was just wondering, do you guys have the TDR balance on renegotiated loans for this quarter?

I think the TDRs have been -- the increase has been pretty consistent to what it was prior quarter. Probably went up about $9 million for the quarter.

[Operator Instructions] And our next question comes from Joe Stephens [ph] with Stephens Capital.

All my questions have been answered except for one. What's the cash position at the holding company right now?

We generally have about $250 million of capital that sits at the holding company. That's invested in a couple of different pieces. It's probably -- the cash piece is probably in a $150 million range.

Okay. So it hasn't really changed too much? Okay.

No.

And our next question comes from Ross Haberman [ph] with Haberman Management.

I was just wondering, could you elaborate, on one of your slides, you talked about the operational issues, which you're working on, which you're not, I guess it said you're not quite done. I was wondering if you could elaborate, if possible, on what that is and what you still have to complete.

There's a number of examples in that...

I think it was Slide 11.

Yes, got it. There's a number of examples of that, but one example would be account management techniques in terms of our equity line of credit portfolio. And we are working with some third-party vendors and also internally to improve our account management techniques, trying to predict better who might be having a problem in the future and how we might be able to work with those customers. And that does require a lot of modeling. And that modeling is probably going to take another 3 or 4 months to complete. So that would be an example of where we're trying to revise our internal operating procedures but are not quite finished yet.

Is that the major item left? Or there's a bunch of smaller items as well as that?

I think there's some smaller items left in terms of some of our collection processes and how we do those and using different techniques and phone systems. So I'd say that's the largest one, but there are some other smaller ones, too.

And do you think you'll be able to accomplish all that by when?

I think we'd like to see the major pieces completed by the end of the year.

The end of the calendar year?

Correct.

[Operator Instructions] It appears there are no further questions at this time. I'd like to turn it back to Mr. Marc Stefanski for any closing remarks.

Well, I just wanted to thank all of you for chiming in. And we are going to close the session now, unless there's any other questions or comments from the team here. That'll do it.

Thank you. This does conclude today's teleconference. As a reminder, the dial-in number for the replay is (800) 677-6124. Please disconnect your lines at this time and have a wonderful day.