TFS Financial Corporation Announces Second Quarter Earnings

Rhea-AI Summary

TFS Financial reported strong financial results for the second quarter of the fiscal year, with a net income of $20.7 million. The company showcased robust portfolio strength and effective expense management, resulting in stable operations amidst a challenging rate environment. Total assets decreased slightly, with notable changes in deposits and loans held for investment. Despite a decrease in net interest income, the company's capital ratios exceeded regulatory requirements, ensuring financial stability.

Positive

• Strong net income of $20.7 million for the quarter, reflecting financial resilience.

• Effective portfolio management with single-family, owner-occupied mortgages and a credit score of 762.

• Robust retail deposit base growth of $500 million in the first six months of the fiscal year.

• Stable operations maintained despite a challenging rate environment through effective cost management.

• Capital ratios exceeding regulatory requirements, ensuring financial stability and strength.

Negative

• Decrease in total assets by less than 1%, mainly attributed to loans held for investment and FHLB stock.

• Net interest income decreased by 3% due to changes in deposit mix and growth in the CD portfolio.

• Total non-interest expenses increased by 4%, driven by marketing costs, salaries, and office expenses.

• Total loan delinquencies and non-accrual loans increased compared to the previous period.

• Net income for the six months decreased by $3.3 million, mainly due to decreased net interest income.

Insights

Financial Analyst

Analyzing the earnings report from TFS Financial Corporation, their net income stability stands out, remaining consistent quarter-over-quarter at $20.7 million. A noteworthy element is the increase in net interest income, which rose by $2.3 million, or 3%, indicating a potential strengthening of their core income-generating activities. However, this was offset by a rise in non-interest expenses by 4%, reflecting increased operational costs, particularly in marketing and technology-related investments.

Their asset portfolio shows a slight decrease, hinting at a conservative or potentially risk-averse positioning. The company's increase in its cash position, by 8% since the previous quarter, suggests strong liquidity management strategies are in place.

From a fiscal year-to-date perspective, there’s a 3% decrease in net interest income, which, despite being partially offset by cost management, raises questions about their ability to sustain margins in a rising interest rate environment. For long-term investors, the company’s capital ratios which substantially exceed the requirements for being 'well capitalized' and the commitment to dividend payments, reflect a strong capital position and a focus on shareholder returns.

Market Research Analyst

The banking sector is sensitive to interest rate fluctuations and TFS Financial's adjustments in their portfolio mix, with an increase in retail CDs and a decrease in loans held for investment, indicate a response to the current high-interest rate environment. This strategy could potentially shield margins but may also suggest a cautious approach to loan growth. Moreover, the growth in the equity loans portfolio contrasts with a decrease in mortgage loan originations and could have implications for the diversification of their loan book.

The steady retail deposit base, with a $500 million growth over the first six months, instills confidence in their customer retention and might buffer against the need for higher-cost funding sources. However, the increase in non-accrual loans, though minimal, could be an early indicator of credit pressure that warrants monitoring for potential impact on asset quality.

Legal and Regulatory Compliance Expert

The detail regarding the mutual holding company's (MHC) approval to waive receipt of dividends is a specific regulatory compliance factor that investors should be aware of. The MHC's ability to waive dividends contributes to the company's capital management strategy and indirectly supports shareholder value. The regulatory environment, including Basel III compliance, shapes the banking industry's landscape and TFS Financial's strong capital ratios provide a cushion against potential regulatory changes that could require higher capital reserves.

It is also important for investors to note the company's compliance with new accounting guidance on troubled debt restructurings, which led to a notable adjustment to retained earnings. Such accounting changes can affect the perceived financial health of the company and, thus, investor sentiment.

Quarter Reflects Portfolio Strength; Expense Management

CLEVELAND--(BUSINESS WIRE)-- TFS Financial Corporation (NASDAQ: TFSL) (the "Company"), the holding company for Third Federal Savings and Loan Association of Cleveland (the "Association"), today announced results for the quarter and six months ended March 31, 2024.

Chairman and CEO Marc A. Stefanski (Photo: Business Wire)

“We continue to follow the same philosophy my parents did when they started Third Federal more than 85 years ago – structuring the company to survive and thrive in any economic scenario,” said Chairman and CEO Marc A. Stefanski. “Our tier 1 capital ratio is nearly 11 percent. We don’t have commercial loans in our portfolio. It consists of single-family, owner-occupied mortgages with an average credit score of 762 and only 0.19 percent in total delinquencies. Our strong retail deposit base is nearly 100 percent FDIC insured, and deposits have grown $500 million the first six months of the fiscal year. In an effort to offset the challenging rate environment, we are effectively managing both our cost of funds and our expense-to-assets, currently at 1.20 percent, to ensure that Third Federal remains strong, stable, and safe.”

The Company reported net income of $20.7 million for the quarter ended March 31, 2024, consistent with $20.7 million of net income for the quarter ended December 31, 2023. Changes of note included an increase in net interest income offset by an increase in non-interest expenses.

Net interest income increased $2.3 million, or 3%, to $71.4 million for the quarter ended March 31, 2024 from $69.1 million for the quarter ended December 31, 2023. Interest income was higher due to an increase in the average balance and yield of interest-earning cash equivalents and an increase in total yield on loans. The interest rate spread was 1.43% for the quarter ended March 31, 2024 compared to 1.39% for the quarter ended December 31, 2023. The net interest margin was 1.71% for the quarter ended March 31, 2024 compared to 1.68% for the prior quarter.

During each of the quarters ended March 31, 2024 and December 31, 2023, there was a $1.0 million release of provision for credit losses. Recoveries of loan amounts previously charged off and low levels of current loan charge-offs resulted in the release of provision. Net recoveries were $1.3 million for the quarter ended March 31, 2024 compared to $1.0 million for the previous quarter. The total allowance for credit losses increased $0.3 million during the quarter ended March 31, 2024 to $94.8 million, or 0.63% of total loans receivable, from $94.6 million, or 0.62% of total loans receivable, at December 31, 2023. The increase was mainly due to an increase in the liability for unfunded commitments. This change was partially offset by a decrease in the provision for losses on loans, resulting from a decrease in the balance of loans held for investment. The total allowance for credit losses included a liability for unfunded commitments of $26.7 million and $25.5 million at March 31, 2024 and December 31, 2023, respectively.

Total non-interest expenses increased $1.9 million, or 4%, to $52.2 million for the quarter ended March 31, 2024, from $50.3 million for the quarter ended December 31, 2023. The increase was primarily due to a $0.7 million increase in marketing costs, but also included increases of $0.4 million in salaries and employee benefits, $0.5 million in office property, equipment and software, and $0.2 million in federal insurance premium and assessments.

Total assets decreased by $36.6 million, or less than 1%, to $17.02 billion at March 31, 2024 from $17.05 billion at December 31, 2023. The decrease was mainly due to a decrease in loans held for investment and Federal Home Loan Bank ("FHLB") stock partially offset by an increase in cash and cash equivalents.

Cash and cash equivalents increased $42.6 million, or 8%, to $594.3 million at March 31, 2024 from $551.8 million at December 31, 2023 due to normal fluctuations and liquidity management.

FHLB stock decreased $14.3 million to $240.4 million at March 31, 2024 from $254.7 million at December 31, 2023. The decrease is a result of stock redemptions by the FHLB. The FHLB has collateral requirements on funds borrowed that dictate the minimum amount of stock owned at any given time.

Loans held for investment, net of allowance and deferred loan expenses, decreased $57.6 million, or less than 1%, to $15.15 billion at March 31, 2024 from $15.21 billion at December 31, 2023. During the quarter ended March 31, 2024, residential core mortgage loans decreased $178.7 million and the home equity loans and lines of credit portfolio increased

$121.9 million. Repayments and sales of residential mortgage loans held for investment outpaced originations during the quarter ended March 31, 2024. The volume of mortgage loan originations remains lower due to a relatively high interest rate environment, resulting in minimal refinance activity.

Compared to December 31, 2023, deposits increased by $14.6 million to $9.94 billion at March 31, 2024, consisting of a $412.6 million increase in retail certificates of deposit ("CDs"), and decreases of $223.3 million in brokered CDs, $95.3 million in savings accounts, $41.3 million in money market deposit accounts, and $39.6 million in checking accounts.

Borrowed funds decreased $75.1 million to $4.96 billion at March 31, 2024 from $5.03 billion at December 31, 2023, as maturing borrowings were paid off with cash and partially replaced with retail deposits.

Fiscal Year-To-Date 2024

The Company reported net income of $41.4 million for the six months ended March 31, 2024 compared to net income of $38.1 million for the six months ended March 31, 2023. The $3.3 million increase was mainly due to an increase in non-interest income and a decrease in non-interest expenses, partially offset by a decrease in net interest income.

Net interest income decreased by $4.0 million, or 3%, to $140.5 million for the six months ended March 31, 2024 compared to $144.4 million for the six months ended March 31, 2023. The decrease was primarily due to a change in deposit mix, along with growth in the CD portfolio and repricing of existing CDs. This was partially offset by an increase in the average balance and yield of total interest-earning assets. The interest rate spread was 1.40% for the six months ended March 31, 2024, a 26 basis point decrease from 1.66% for the six months ended March 31, 2023. The net interest margin was 1.70% for the six months ended March 31, 2024 compared to 1.86% for the prior year period.

During each of the six months ended March 31, 2024 and March 31, 2023, there was a $2.0 million release of provision for credit losses. Net loan recoveries totaled $2.3 million for the six months ended March 31, 2024 and $2.9 million for the same period in the prior year.

The total allowance for credit losses at March 31, 2024 was $94.8 million, or 0.63% of total loans receivable, compared to $104.8 million, or 0.69% of total loans receivable, at September 30, 2023. The decrease was almost entirely due to the adoption of recently issued accounting guidance related to the accounting for troubled debt restructurings, which resulted in a $10.2 million reduction to the allowance and a $7.9 million adjustment to retained earnings, net of tax. The allowance for credit losses included $26.7 million and $27.5 million in liabilities for unfunded commitments at March 31, 2024 and September 30, 2023, respectively. Total loan delinquencies increased $4.9 million to $28.3 million, or 0.19% of total loans receivable, at March 31, 2024 from $23.4 million, or 0.16% of total loans receivable, at September 30, 2023. Non-accrual loans increased $3.4 million to $35.3 million, or 0.23% of total loans receivable, at March 31, 2024 from $31.9 million, or 0.21% of total loans receivable, at September 30, 2023.

Total non-interest income increased $1.5 million, or 14%, to $12.0 million for the six months ended March 31, 2024 from $10.5 million for the six months ended March 31, 2023. The increase was mainly due to a $1.0 million increase in income and death benefits from life insurance contracts. Additionally, there was a $0.5 million increase in other non-interest income that primarily related to changes in fair value on commitments to originate mortgage loans.

Total non-interest expenses decreased $6.3 million, or 6%, to $102.5 million for the six months ended March 31, 2024, from $108.8 million for the six months ended March 31, 2023 and included decreases of $4.9 million in marketing costs and $4.2 million in salaries and employee benefits, partially offset by increases of $1.6 million in federal ("FDIC") insurance premiums, $0.7 million in other operating expenses and $0.5 million in office property, equipment and software expenses. The decrease in salaries and employee benefits is primarily related to decreases in staffing and accruals for discretionary incentive payments. FDIC premiums increased due to growth in deposits and a two basis point increase in FDIC assessment rates that went into effect on January 1, 2023. The increase in other operating expenses was mainly due to increases in loan subsidy and down payment assistance programs. These programs expand opportunities for borrowers, particularly those working with our community housing partners, to obtain home financing.

Total assets increased by $99.2 million, or 1%, to $17.02 billion at March 31, 2024 from $16.92 billion at September 30, 2023. The increase was mainly the result of an increases in cash and cash equivalents partially offset by a decrease in loans held for investment.

Cash and cash equivalents increased $127.6 million, or 27%, to $594.3 million at March 31, 2024 from $466.7 million at September 30, 2023 due to normal fluctuations and liquidity management.

Loans held for investment, net of allowance and deferred loan expenses, decreased $16.1 million, or less than 1%, to $15.15 billion at March 31, 2024 from $15.17 billion at September 30, 2023. The residential mortgage loan portfolio decreased $307.4 million, to $11.77 billion, and home equity loans and lines of credit increased $289.1 million, to $3.32 billion. Loans originated and purchased during the six months ended March 31, 2024 included $408.8 million of residential mortgage loans and $915.4 million of equity loans and lines of credit compared to $821.9 million of residential mortgage loans and $720.0 million of equity loans and lines of credit originated or purchased during the six months ended March 31, 2023. The decrease in mortgage loan originations was primarily due to a relatively high interest rate environment, resulting in minimal refinance activity. New mortgage loans included 93% purchases and 24% adjustable rate loans during the six months ended March 31, 2024. There were $115.4 million of long-term fixed-rate mortgage loans sold during the six months ended March 31, 2024.

Deposits increased $485.8 million, or 5%, to $9.94 billion at March 31, 2024 from $9.45 billion at September 30, 2023. The increase was the result of an $868.4 million increase in certificates of deposit, partially offset by a $194.2 million decrease in savings accounts, a $106.6 million decrease in money market deposit accounts and a $92.3 million decrease in checking accounts. There were $1.26 billion in brokered deposits at March 31, 2024 compared to $1.16 billion at September 30, 2023. At March 31, 2024, brokered deposits included $725.0 million of three-month certificates of deposit accounts, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.0 years.

Borrowed funds decreased $318.2 million, or 6%, to $4.96 billion at March 31, 2024 from $5.27 billion at September 30, 2023. The decrease was primarily due to borrowings paid off at maturity. The total balance of borrowed funds at March 31, 2024, all from the FHLB, included $1.83 billion of term advances with a weighted average maturity of approximately 2.2 years, and $3.10 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.4 years. Additional borrowing capacity at the FHLB was $1.88 billion at March 31, 2024, available for terms less than one year.

Total shareholders' equity decreased $19.9 million, or 1%, to $1.91 billion at March 31, 2024 from $1.93 billion at September 30, 2023. Activity reflects $41.4 million of net income, a $7.9 million adjustment to retained earnings related to a change in accounting principle described above with respect to changes in the allowance for credit losses, a $42.8 million net decrease in accumulated other comprehensive income, dividends paid of $29.4 million and net positive adjustments of $3.0 million related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income is primarily due to a net decrease in unrealized gains and losses on swap contracts. There were no stock repurchases during the six months ended March 31, 2024. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares authorized for repurchase at March 31, 2024.

The Company declared and paid a quarterly dividend of $0.2825 per share during each of the quarters in fiscal year 2024. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 11, 2023 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 11, 2024), including a total of up to $0.565 remaining. The MHC has conducted the member vote to approve the dividend waiver each of the past ten years under Federal Reserve regulations and for each of those ten years, approximately 97% of the votes cast were in favor of the waiver.

The Company operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At March 31, 2024 all of the Company's capital ratios substantially exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 10.72%, its Common Equity Tier 1 and Tier 1 ratios were each 19.05% and its total capital ratio was 19.78%.

Presentation slides as of March 31, 2024 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning May 1, 2024. The Company will not be hosting a conference call to discuss its operating results.

Third Federal Savings and Loan Association is a leading provider of savings and mortgage products, and operates under the values of love, trust, respect, a commitment to excellence and fun. Founded in Cleveland in 1938 as a mutual association by Ben and Gerome Stefanski, Third Federal’s mission is to help people achieve the dream of home ownership and financial security. It became part of a public company in 2007 and celebrated its 85^th anniversary in May 2023. Third Federal, which lends in 26 states and the District of Columbia, is dedicated to serving consumers with competitive rates and outstanding service. Third Federal, an equal housing lender, has 21 full service branches in Northeast Ohio, four lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of March 31, 2024, the Company’s assets totaled $17.02 billion.

Forward Looking Statements
This report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include, among other things:
●	statements of our goals, intentions and expectations;
●	statements regarding our business plans and prospects and growth and operating strategies;
●	statements concerning trends in our provision for credit losses and charge-offs on loans and off-balance sheet exposures;
●	statements regarding the trends in factors affecting our financial condition and results of operations, including credit quality of our loan and investment portfolios; and
●	estimates of our risks and future costs and benefits.
These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:
●	significantly increased competition among depository and other financial institutions, including with respect to our ability to charge overdraft fees;
●	inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments, or our ability to originate loans;
●	general economic conditions, either globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected;
●	the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of our loans and other assets, and changes in estimates of the allowance for credit losses;
●	decreased demand for our products and services and lower revenue and earnings because of a recession or other events;
●	changes in consumer spending, borrowing and savings habits, including repayment speeds on loans;
●	adverse changes and volatility in the securities markets, credit markets or real estate markets;
●	our ability to manage market risk, credit risk, liquidity risk, reputational risk, regulatory risk and compliance risk;
●	our ability to access cost-effective funding;
●	changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;
●	legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends;
●	changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or the PCAOB;
●	the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us;
●	our ability to enter new markets successfully and take advantage of growth opportunities;
●	our ability to retain key employees;
●	future adverse developments concerning Fannie Mae or Freddie Mac;
●	changes in monetary and fiscal policy of the U.S. Government, including policies of the U.S. Treasury, the Federal Reserve System, Fannie Mae, the OCC, FDIC, and others;
●	the continuing governmental efforts to restructure the U.S. financial and regulatory system;
●	the ability of the U.S. Government to remain open, function properly and manage federal debt limits;
●	changes in policy and/or assessment rates of taxing authorities that adversely affect us or our customers;
●	changes in accounting and tax estimates;
●	changes in our organization and changes in expense trends, including but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses;
●	the inability of third-party providers to perform their obligations to us;
●	our ability to retain key employees;
●	civil unrest;
●	cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems; and
●	the impact of wide-spread pandemic, including COVID-19, and related government action, on our business and the economy.
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
(In thousands, except share data)
	March 31, 2024				December 31, 2023				September 30, 2023
ASSETS
Cash and due from banks	$	27,381			$	45,858			$	29,134
Other interest-earning cash equivalents		566,953				505,910				437,612
Cash and cash equivalents		594,334				551,768				466,746
Investment securities available for sale		520,172				525,175				508,324
Mortgage loans held for sale		9,698				1,095				3,260
Loans held for investment, net:
Mortgage loans		15,152,032				15,210,653				15,177,844
Other loans		4,709				4,811				4,411
Deferred loan expenses, net		61,047				60,862				60,807
Allowance for credit losses on loans		(68,169	)			(69,084	)			(77,315	)
Loans, net		15,149,619				15,207,242				15,165,747
Mortgage loan servicing rights, net		7,547				7,634				7,400
Federal Home Loan Bank stock, at cost		240,365				254,700				247,098
Real estate owned, net		230				1,070				1,444
Premises, equipment, and software, net		33,885				34,209				34,708
Accrued interest receivable		56,887				55,614				53,910
Bank owned life insurance contracts		313,458				311,848				312,072
Other assets		90,955				103,436				117,270
TOTAL ASSETS	$	17,017,150			$	17,053,791			$	16,917,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	9,935,631			$	9,921,056			$	9,449,820
Borrowed funds		4,955,438				5,030,561				5,273,637
Borrowers’ advances for insurance and taxes		99,492				109,093				124,417
Principal, interest, and related escrow owed on loans serviced		25,946				29,204				29,811
Accrued expenses and other liabilities		93,146				97,150				112,933
Total liabilities		15,109,653				15,187,064				14,990,618
Commitments and contingent liabilities
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding		—				—				—
Common stock, $0.01 par value, 700,000,000 shares authorized; 332,318,750 shares issued		3,323				3,323				3,323
Paid-in capital		1,751,960				1,750,440				1,755,027
Treasury stock, at cost		(772,195	)			(772,195	)			(776,101	)
Unallocated ESOP shares		(24,917	)			(26,000	)			(27,084	)
Retained earnings—substantially restricted		906,908				900,973				886,984
Accumulated other comprehensive income		42,418				10,186				85,212
Total shareholders’ equity		1,907,497				1,866,727				1,927,361
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	17,017,150			$	17,053,791			$	16,917,979

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share and per share data)
	For the three months ended
	March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023			March 31, 2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	162,970			$	162,035			$	154,763			$	144,347		$	136,835
Investment securities available for sale		4,476				4,395				4,141				3,712			3,455
Other interest and dividend earning assets		16,047				10,729				9,836				8,598			7,262
Total interest and dividend income		183,493				177,159				168,740				156,657			147,552
INTEREST EXPENSE:
Deposits		72,685				64,326				55,565				48,905			39,876
Borrowed funds		39,430				43,741				42,812				38,973			38,408
Total interest expense		112,115				108,067				98,377				87,878			78,284
NET INTEREST INCOME		71,378				69,092				70,363				68,779			69,268
PROVISION (RELEASE) FOR CREDIT LOSSES		(1,000	)			(1,000	)			500				—			(1,000	)
NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES		72,378				70,092				69,863				68,779			70,268
NON-INTEREST INCOME:
Fees and service charges, net of amortization		1,845				1,748				2,061				1,919			1,924
Net gain (loss) on the sale of loans		442				481				(119	)			21			579
Increase in and death benefits from bank owned life insurance contracts		2,193				3,191				2,204				2,790			2,123
Other		1,242				895				954				1,113			703
Total non-interest income		5,722				6,315				5,100				5,843			5,329
NON-INTEREST EXPENSE:
Salaries and employee benefits		27,501				27,116				28,660				25,332			30,390
Marketing services		5,099				4,431				3,881				7,023			6,671
Office property, equipment and software		7,303				6,845				6,886				7,246			6,802
Federal insurance premium and assessments		4,013				3,778				3,629				3,574			3,488
State franchise tax		1,238				1,176				1,185				1,230			1,268
Other expenses		7,044				6,931				7,243				8,472			6,955
Total non-interest expense		52,198				50,277				51,484				52,877			55,574
INCOME BEFORE INCOME TAXES		25,902				26,130				23,479				21,745			20,023
INCOME TAX EXPENSE		5,189				5,423				3,933				4,142			4,115
NET INCOME	$	20,713			$	20,707			$	19,546			$	17,603		$	15,908
Earnings per share - basic and diluted	$	0.07			$	0.07			$	0.07			$	0.06		$	0.06
Weighted average shares outstanding
Basic		278,183,041				277,841,526				277,589,775				277,472,312			277,361,293
Diluted		279,046,837				279,001,898				278,826,441				278,590,810			278,499,145

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share and per share data)
	For the Six Months Ended
	March 31,
		2024				2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	325,005			$	266,500
Investment securities available for sale		8,871				6,517
Other interest and dividend earning assets		26,776				13,505
Total interest and dividend income		360,652				286,522
INTEREST EXPENSE:
Deposits		137,011				69,731
Borrowed funds		83,171				72,366
Total interest expense		220,182				142,097
NET INTEREST INCOME		140,470				144,425
PROVISION (RELEASE) FOR CREDIT LOSSES		(2,000	)			(2,000	)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		142,470				146,425
NON-INTEREST INCOME:
Fees and service charges, net of amortization		3,593				3,860
Net gain on the sale of loans		923				596
Increase in and death benefits from bank owned life insurance contracts		5,384				4,361
Other		2,137				1,669
Total non-interest income		12,037				10,486
NON-INTEREST EXPENSE:
Salaries and employee benefits		54,617				58,793
Marketing services		9,530				14,384
Office property, equipment and software		14,148				13,602
Federal insurance premium and assessments		7,791				6,249
State franchise tax		2,414				2,476
Other expenses		13,975				13,264
Total non-interest expense		102,475				108,768
INCOME BEFORE INCOME TAXES		52,032				48,143
INCOME TAX EXPENSE		10,612				10,042
NET INCOME	$	41,420			$	38,101
Earnings per share - basic and diluted	$	0.15			$	0.13
Weighted average shares outstanding
Basic		278,011,351				277,340,877
Diluted		279,019,468				278,472,705

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
		Three Months Ended											Three Months Ended											Three Months Ended
		March 31, 2024											December 31, 2023											March 31, 2023
		Average Balance				Interest Income/ Expense				Yield/ Cost (1)			Average Balance				Interest Income/ Expense				Yield/ Cost (1)			Average Balance				Interest Income/ Expense				Yield/ Cost (1)
		(Dollars in thousands)
Interest-earning assets:
Interest-earning cash equivalents		$	720,657			$	9,919			5.51	%		$	398,506			$	5,124			5.14	%		$	350,437			$	3,947			4.51	%
Investment securities			72,091				907			5.03	%			64,778				850			5.25	%			3,649				11			1.21	%
Mortgage-backed securities			448,653				3,569			3.18	%			444,411				3,545			3.19	%			475,902				3,444			2.89	%
Loans (2)			15,163,185				162,970			4.30	%			15,232,349				162,035			4.26	%			14,517,771				136,835			3.77	%
Federal Home Loan Bank stock			244,560				6,128			10.02	%			270,540				5,605			8.29	%			230,496				3,315			5.75	%
Total interest-earning assets			16,649,146				183,493			4.41	%			16,410,584				177,159			4.32	%			15,578,255				147,552			3.79	%
Noninterest-earning assets			505,145											553,461											527,935
Total assets		$	17,154,291										$	16,964,045										$	16,106,190
Interest-bearing liabilities:
Checking accounts		$	887,584				98			0.04	%		$	937,817				118			0.05	%		$	1,128,560				2,229			0.79	%
Savings accounts			1,561,331				5,598			1.43	%			1,721,466				6,912			1.61	%			1,668,115				5,028			1.21	%
Certificates of deposit			7,548,314				66,989			3.55	%			6,847,482				57,296			3.35	%			6,110,460				32,619			2.14	%
Borrowed funds			5,033,253				39,430			3.13	%			5,228,239				43,741			3.35	%			5,112,767				38,408			3.00	%
Total interest-bearing liabilities			15,030,482				112,115			2.98	%			14,735,004				108,067			2.93	%			14,019,902				78,284			2.23	%
Noninterest-bearing liabilities			212,206											278,801											209,161
Total liabilities			15,242,688											15,013,805											14,229,063
Shareholders’ equity			1,911,603											1,950,240											1,877,127
Total liabilities and shareholders’ equity		$	17,154,291										$	16,964,045										$	16,106,190
Net interest income						$	71,378										$	69,092										$	69,268
Interest rate spread (1)(3)										1.43	%										1.39	%										1.56	%
Net interest-earning assets (4)		$	1,618,664										$	1,675,580										$	1,558,353
Net interest margin (1)(5)							1.71	%										1.68	%										1.78	%
Average interest-earning assets to average interest-bearing liabilities			110.77	%										111.37	%										111.12	%
Selected performance ratios:
Return on average assets (1)							0.48	%										0.49	%										0.40	%
Return on average equity (1)							4.33	%										4.25	%										3.39	%
Average equity to average assets							11.14	%										11.50	%										11.65	%

(1)	Annualized.
(2)	Loans include both mortgage loans held for sale and loans held for investment.
(3)	Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5)	Net interest margin represents net interest income divided by total interest-earning assets.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES AND YIELDS (unaudited)
		Six Months Ended											Six Months Ended
		March 31, 2024											March 31, 2023
		Average Balance				Interest Income/ Expense				Yield/ Cost (1)			Average Balance				Interest Income/ Expense				Yield/ Cost (1)
		(Dollars in thousands)
Interest-earning assets:
Interest-earning cash equivalents		$	559,581			$	15,043			5.38	%		$	352,325			$	7,196			4.08	%
Investment securities			68,435				1,757			5.13	%			3,634				22			1.21	%
Mortgage-backed securities			446,532				7,114			3.19	%			469,933				6,495			2.76	%
Loans (1)			15,197,767				325,005			4.28	%			14,457,228				266,500			3.69	%
Federal Home Loan Bank stock			257,550				11,733			9.11	%			224,889				6,309			5.61	%
Total interest-earning assets			16,529,865				360,652			4.36	%			15,508,009				286,522			3.70	%
Noninterest-earning assets			529,303											506,658
Total assets		$	17,059,168										$	16,014,667
Interest-bearing liabilities:
Checking accounts		$	912,701				216			0.05	%		$	1,156,728				4,639			0.80	%
Savings accounts			1,641,398				12,510			1.52	%			1,717,235				8,735			1.02	%
Certificates of deposit			7,197,898				124,285			3.45	%			6,041,692				56,357			1.87	%
Borrowed funds			5,130,746				83,171			3.24	%			4,992,956				72,366			2.90	%
Total interest-bearing liabilities			14,882,743				220,182			2.96	%			13,908,611				142,097			2.04	%
Noninterest-bearing liabilities			245,503											233,257
Total liabilities			15,128,246											14,141,868
Shareholders’ equity			1,930,922											1,872,799
Total liabilities and shareholders’ equity		$	17,059,168										$	16,014,667
Net interest income						$	140,470										$	144,425
Interest rate spread (1)(2)										1.40	%										1.66	%
Net interest-earning assets (3)		$	1,647,122										$	1,599,398
Net interest margin (1)(4)							1.70	%										1.86	%
Average interest-earning assets to average interest-bearing liabilities			111.07	%										111.50	%
Selected performance ratios:
Return on average assets (1)							0.49	%										0.48	%
Return on average equity (1)							4.29	%										4.07	%
Average equity to average assets							11.32	%										11.69	%

(1)	Annualized.
(2)	Loans include both mortgage loans held for sale and loans held for investment.
(3)	Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5)	Net interest margin represents net interest income divided by total interest-earning assets.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240430084946/en/

Jennifer Rosa         (216) 429-5037

Source: Third Federal Savings and Loan

FAQ

What was TFS Financial 's net income for the second quarter of the fiscal year?

TFS Financial reported a net income of $20.7 million for the quarter.

What was the main reason for the decrease in net interest income for the six months ended March 31, 2024?

The decrease was primarily due to a change in deposit mix and growth in the CD portfolio.

What is the total allowance for credit losses at March 31, 2024, as a percentage of total loans receivable?

The total allowance for credit losses was $94.8 million, or 0.63% of total loans receivable.

Why did total non-interest expenses increase for the quarter ended March 31, 2024?

The increase was primarily due to higher marketing costs, salaries, and office expenses.

What is the Company's Tier 1 leverage ratio as of March 31, 2024?

The Company's Tier 1 leverage ratio was 10.72%.

Where can I find the presentation slides as of March 31, 2024?

The presentation slides will be available on the Company's website under the Investor Relations link within the 'Recent Presentations' menu.

How many branches does Third Federal Savings and Loan Association have in Northeast Ohio?

Third Federal has 21 full-service branches in Northeast Ohio.

In which year did Third Federal become part of a public company?

Third Federal became part of a public company in 2007.