7. TFS Financial Corp. Shares of TFS Financial ( TFSL) of Cleveland closed at $9.14 Friday, returning 1% year-to-date. Based on the mean price target of $12.00 among analysts polled by FactSet, the shares have 31% upside potential. The company is part of a mutual thrift holding company structure, with roughly 16.5% of common shares held by the public, and the rest held by Third Federal Savings and Loan Association of Cleveland, MHC, as of Sept. 30 Main subsidiary Third Federal S&LA entered into an Office of Thrift Supervision Memorandum of Understanding, or MOU, in August of last year, agreeing to reduce its concentration in home equity loans. The company has a plan in place to reduce home equity loan commitments by $1 billion, including a $300 million reduction in home equity balances, by the end of 2011. In February, the MOU was terminated, but replaced with two new MOUs, under which both holding companies and the thrift subsidiary agreed to outside reviews of interest rate risk policies, management compensation policies and an "independent enterprise risk management study and a plan to address any deficiencies," as well as other managerial and operating improvements. TFS said in its annual report for its fiscal year ended Sept. 30, that it was in compliance with all stipulations of the new MOUs. TFS had $10.9 billion in total assets as of Sept. 30. For its fiscal 2011, the company reported earnings of $9.3 million, or three cents a share, compared to $11.3 million, or four cents a share, in fiscal 2010. Fiscal 2011 net interest income increased 9% to 247.6 million. The provision for loan losses declined to $98.5 million in Fiscal 2011, from $106 million in Fiscal 2010. The decline in earnings mainly reflected $25.3 million in gains on loan sales, recorded the previous year. The company reported an ROA of 0.09% for fiscal 2011, and a net interest margin of 2.32%, improving from 2.16% the previous year. Sterne Agee analyst Mike Shafir on Nov. 17 reiterated his "Buy" rating for TFS Financial, with a $12.00 price target, saying that the company was "closer to the MOU termination," because of a "reduction in home equity concentration." Shafir added that "Positive trends in the quarter included a higher net interest margin (NIM), a lower level of non-accrual loans, and lower credit costs." The consensus among the two analysts covering the company is for earnings of 14 cents a share in 2012, followed by earnings of 20 cents a share in 2013. The shares trade for 1.6 times their tangible book value of $5.71, according to SNL. Both analysts covering TFS Financial rate the shares a buy. The company is clearly a work in progress, with the regulators stepping in after mismanagement led to poor returns for several years. Over the past five fiscal years, the ROA has ranged from 0.09% to 0.52%. On the other hand, TFS is very strongly capitalized, with a tangible common equity ratio of 16.21% as of Sept. 30, according to SNL Financial. For a mutual thrift holding company, common shareholders always look forward to a "second step conversion" to full stock ownership. Under that scenario, Shafir estimates that a fully converted TFS Financial would have a tangible book value ranging from $11.84 to $13.67 a share, which would be a very significant return for investors. Interested in more on TFS Financial? See TheStreet Ratings' report card for this stock.