Welcome to TFS Financial Corporation’s first 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 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…

(Operator Instructions) And our first question comes from Mike Shafir with Sterne Agee. Go ahead please. Your line is open.

I was just wondering if maybe you could speak about some of the offsets, your margins remain relatively stable but, cost of CD is still at 2.5% and I was wondering why is that kind of so far above the market and how much more do you guys have re-pricing this year, kind what rates are you putting in new CDs on so we can continue to potentially fight the pressures of reinvestment yields on the security side.

Hi Mike this is Dave Huffman and thanks for listening in on the call. And that is s a great question. It is one that we certainly pay a lot of attention to our CD portfolio is probably a little bit longer than lot of other instruments because we have a longer duration asset with our fixed rate model. So we do try to target to longer CD so anytime you have a [positive assured] in your current you are going to have a higher rate factor. So we do have re-pricing coming and so that should continue for us.

And just real quickly on the non interest income that really fell off a lot sequentially this quarter. I was wondering is there anything unique or one-time in the numbers there?

I see that when we look at it – are talking about the non-interest expense Mike?

No the non-interest income

On the income we have a little bit more in a way of our servicing the amortization on our sold loan portfolio because the repayments kicked up. So that was probably the biggest variance there and plus the portfolio is shrinking in and off itself because we haven’t been selling our backend of anyway. So, I’d say that’s where when we look at it I think we were down about a million dollars in the fees and service charges and the amortization that’s what caused that.

And our next question comes from Joe Stieven with Stieven Capital. Go ahead please. Your line is open

Can you tell me how much cash do you have sitting at the holding company; the cash and real short term investments? That's question one.

I would say there is probably capital wise there is about $275 million probably liquid funds, maybe a $160 million to $165 million or so.

Sorry Paul, say those numbers again. You said $275 million?

Total capital at the holding company, separate from the Thrift is probably about $275 million. Liquid is probably a $165 million.

And so obviously your ability to use that for share repurchases and dividend has no impact at all on the Bank capital ratios which you are still tremendously in excess of all the requirements. And I guess, what is taking, I mean we as stockholders, we’ve been very supportive, but at some point it just starts to get annoying that this process is taking so long and I mean why do you guys think it’s taking so long? Well, probably a good reason not to answer.

It’s Marc Stefanski; you know we’re dealing with the federal government, we’re dealing with a regulator and that’s brand new to some of the Thrifts and the mutual holding companies, so they are digesting what we have. It just takes time; there has been a lot of training by the OCC and some by the fed for the group that comes in and actually monitors what we’re doing and examines the books of Third Federal and all the other companies. So this has just taken unfortunately longer than we had hoped for and obviously we feel your pain and understand and commensurate with you from that perspective and no one wants to move them all further and faster down the field than all of us here in this room and the entire company as well as all the other shareholders. So Joe, I hear you….

Its just for us trading Marc, when you hear that kind of quote you know statutory guidance on TV right now saying the biggest banks have the toughest capital ratios and we’re looking at you guys with 20% total cap being told you can’t pay dividends when people with far less capital ratios and they were paying dividend, its just annoying. So I am sorry, it was mandatorial comment for the day. Thanks.

Thank you. (Operator Instructions) Now we’ll move on to Frank Rango from Purchase Capital Management. Go ahead please.

With regards to your production of ARMs, do you guys have a target in mind as to where your portfolio mix; your objective will be between ARMs and fixed rate mortgage?

Really been focusing on trying to balance some our fixed rate in our portfolio, I am sorry this is Meredith Weil, to more of our 50-50 balance and we’ve actually gotten at a point where we’re approaching a 50-50 balance with the adjustable rates in general and so we’ll continue to – and really that’s why we’re expanding in the new markets so that we can continue to grow the ARMs specifically. In the new markets we are only offering ARMs. So that’s really been helpful in balancing out the fixed rate versus ARMs.

And can you explain what the difference is between the product you are offering now and conforming product and exactly why you haven’t been taking advantage perhaps of the fact that you could possibly sell some of these to the agencies?

On our fixed rate, we have a different process. In the past, we were granted waivers from Fannie Mae and those waivers are no longer available for any lender. Our practice really are underwriting guidelines that are very strong obviously from the loans that we’ve have been originating. We have very high credit scores and very low LTVs, but our practice does differ a little bit from what Fannie Mae requires. They have certain rules along way when you are originating loans, when you are closing a loan, the requirements that you have to go through and what you have to put the customer through. We look at our relationship with the customers, the long-term relationship and we want successful homeowners and so we really look at high credit standards. But we also want to treat our customers well and some of the requirements that Fannie Mae has instituted require you to possibly deny a customer close to closing and those are things that we don’t really want to do and treat high credit quality customers that way. And so at this point in time, we’ve made a decision to follow our standards and hopefully in the future we will be able to sell loans, but at this point, we’ve made the decision not to.

One other question, I never really focused on Bank owned life insurance contracts. It is a $172 million. Are those life settlements or exactly what are those?

Frank this is Dave Huffman. Those are standard contracts.

So, this is a savings bank life insurance?

No. They’re individual life insurance policies.

And they end up on your balance sheet because….?

The premiums were funded upfront.

But the Bank is actually the beneficiary of the death benefits?

Yes.

That’s a pretty big, that’s a pretty good big investment in life insurance policies, isn’t it?

I think we catered for about 10 years and I think that from a regulatory perspective there has always been a 25% of capital limit and we’ve saved a substantially below that. So it’s not, I think an uncommon investment.

Just, if we could just follow-up for a second. I am just wondering how you value those policies?

It’s really the cash surrender value.

Cash surrender value.

Thank you. We will now move on to Mike Godby from FIG Partners. Go ahead please. Your line is open.

I’ve got a simple question. Given your regulatory environment, I know how harsh it’s been on you folks as far as repurchases and the concerns about potential dividends. If by chance, the regulatory environment doesn’t shift and we don’t get relief on dividends or the repurchase possibilities, how many years would you have to go through that in order to come to terms with the second step conversion?

That’s a good question. We really haven’t given that much thought. We’re optimistic that this thing is going to be moved along in the very next future, but we haven’t given that much thought in terms of the second step and how that applies to what’s going on now.

(Operator Instructions) It appears we have a follow-up question from Frank Rango. Go ahead please.

Sorry to keep asking on this, but with regard to the regulatory scrutiny you are under right now, is there any – do you guys get the sense at all the fact that you are not originating conforming mortgages that you have a sort of a non-standard product; not that I am saying there is anything wrong with it, but you think that might be having some impact on the amount of time it’s taking to get your application to be able to repurchase stock and do dividends with regulatory agencies?

We don’t have a sense that that’s the case at all. The focus is certainly going to be on what we have done with the items listed in the MOU and Dave did you have any other?

Actually also Frank occasionally, we did sell loans in the last year just as kind of a proof-of-concept; we did some more loans because we’ve been sitting -- we had so much cash that was really no advantage to us to sell the loans. So the fact that we don’t sell the Fannie Mae currently, we don’t view that as suggesting that our portfolio is either untradeable or in a back foot.

And I am showing no further audio questions at this time, so I would like to hand it back to Marc Stefanski for any additional or closing comments.

Just wanted to thank all of you for chiming in and again Paul Huml will be available for other questions if you had some along the way as he has done in the past. So thank you Paul for your presentation, that's well done and thank you again for your time and effort and the coordinating all this Paul and everyone else here at Third Federal and to our shareholders, we are working in your benefit and we will continue to strive to make things better with the regulatory environment and work on your behalf to allow our newer investment to be enhanced. So thank you again.

Thank you. This does conclude today's teleconference. As a reminder, the dial-in number for the replay is 800-283-8217. Please disconnect your lines at this time and have a wonderful day.