TFS Financial Sees Positives Continue in Third Fiscal Quarter

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TFS Financial 's Q3 fiscal 2024 results reveal a mixed financial picture. Net income decreased slightly to $20.0 million from $20.7 million in the previous quarter, primarily due to lower net interest income and a smaller release of provision for credit losses. However, this was partially offset by reduced non-interest expenses.

The company's net interest income declined by $2.1 million, or 3%, to $69.3 million. This decrease was mainly attributed to higher costs of interest-bearing liabilities, as maturing low-rate deposits and borrowings were replaced with higher-cost instruments. The interest rate spread narrowed to 1.36% from 1.43%, while the net interest margin contracted to 1.67% from 1.71%.

On a positive note, TFS Financial's loan portfolio showed growth, with total loans held for investment increasing by $40.3 million to $15.19 billion. The home equity loans and lines of credit portfolio saw a significant increase of $269.2 million, offsetting a $225.3 million decrease in residential core mortgage loans.

The company's deposit base grew by $90.3 million to $10.03 billion, driven by a $226.4 million increase in certificates of deposit. This growth in retail deposits allowed TFS Financial to reduce its borrowed funds by $126.1 million.

While the company's performance shows resilience in a challenging interest rate environment, investors should monitor the narrowing interest rate spread and its potential impact on future profitability. The growth in the loan portfolio and deposit base are positive indicators, but the shift towards higher-cost funding sources may continue to pressure margins in the near term.

TFS Financial's Q3 results highlight several key market trends in the banking sector. The 6% growth in retail deposits over the last three months underscores the increasing competition for customer funds, with banks offering attractive rates on certificates of deposit to secure stable funding sources. This trend is likely to continue as long as interest rates remain elevated.

The company's loan originations, totaling $2.2 billion with an average yield of 7.31%, reflect the current high-rate environment and its impact on lending activities. The shift towards home equity loans and lines of credit, which increased by $269.2 million, suggests that consumers are leveraging their home equity in the face of high mortgage rates, potentially to finance home improvements or consolidate debt.

The decrease in residential core mortgage loans by $225.3 million aligns with broader market trends, as higher interest rates continue to dampen refinancing activity and challenge affordability for new home purchases. This shift in the loan portfolio composition could impact the company's risk profile and future earnings potential.

TFS Financial's focus on expense management, resulting in a 5% reduction from 2023, mirrors industry-wide efforts to maintain profitability in a challenging interest rate environment. This cost discipline will likely remain important as banks navigate potential economic uncertainties and margin pressures.

Overall, TFS Financial's performance reflects the broader challenges and adaptations occurring in the banking sector, with a focus on deposit growth, portfolio diversification and operational efficiency to navigate the current economic landscape.

07/30/2024 - 05:39 PM

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 nine months ended June 30, 2024.

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

The Company reported net income of $20.0 million for the quarter ended June 30, 2024 compared to $20.7 million of net income for the quarter ended March 31, 2024. The change in net income included decreases in net interest income and release of provision for credit losses partially offset by a decrease in non-interest expense.

“Despite higher interest rates and economic uncertainty, our earnings are more than 10% higher this year than last year,” said Chairman and CEO Marc A. Stefanski. “Retail deposit growth of 6% in the last three months is a result of our strong CD product offerings. Our $2.2 billion in loan originations have an average yield of 7.31%, and our ongoing expense management resulted in a 5% reduction from 2023. All of our capital ratios continue to exceed the amounts required to be well capitalized, including a Tier I capital ratio of nearly 11%, further showing that we are strong, stable, and safe.”

Net interest income decreased $2.1 million, or 3%, to $69.3 million for the quarter ended June 30, 2024 from $71.4 million for the quarter ended March 31, 2024. Net interest income was lower as the weighted average cost of interest-bearing liabilities increased. Certificates of deposit and borrowings that were obtained in a lower interest rate environment matured during the quarter and were replaced by instruments with higher costs. The weighted average yield of interest-earning assets, primarily loans, increased during the quarter. The interest rate spread was 1.36% for the quarter ended June 30, 2024 compared to 1.43% for the quarter ended March 31, 2024. The net interest margin was 1.67% for the quarter ended June 30, 2024 compared to 1.71% for the prior quarter.

During the quarter ended June 30, 2024, there was a $0.5 million release of provision for credit losses compared to a $1.0 million release of provision for the quarter ended March 31, 2024. Continued recoveries of loan amounts previously charged off and low levels of current loan charge-offs resulted in the release of provision. Net recoveries were $1.4 million for the quarter ended June 30, 2024 compared to $1.3 million for the previous quarter. The total allowance for credit losses increased $0.9 million during the quarter ended June 30, 2024 to $95.7 million, or 0.63% of total loans receivable from $94.8 million, or 0.63% of total loans receivable, at March 31, 2024. The increase was mainly due to an increase in off- balance sheet commitments related to commitments to originate and undrawn portions of home equity lines of credit. The total allowance for credit losses included a liability for unfunded commitments of $28.2 million and $26.7 million at June 30, 2024 and March 31, 2024, respectively.

Total non-interest expense decreased $1.4 million, or 3%, to $50.8 million for the quarter ended June 30, 2024 from $52.2 million for the quarter ended March 31, 2024. There was a decrease of $0.7 million in both salaries and employee benefits and federal ("FDIC") insurance premium. Contributing to the decrease in salaries and employee benefits was a decrease in expense recognized for the Company's equity incentive plan, as certain grants fully vested during the previous quarter, and an increase in salary deferrals related to loan origination activities during the quarter. The decrease in FDIC premium was primarily due to an amendment to the FDIC's risk-based assessment that incorporated recent changes in accounting for and measurement of troubled debt restructurings ("TDRs").

Total assets increased by $17.8 million, or less than 1%, to $17.03 billion at June 30, 2024 from $17.02 billion at March 31, 2024. The increase was mainly due to increases in loans held for sale and loans held for investment partially offset by decreases in cash and cash equivalents and Federal Home Loan Bank ("FHLB") stock.

Cash and cash equivalents decreased $33.9 million, or less than 1%, to $560.4 million at June 30, 2024 from $594.3 million at March 31, 2024 due to normal fluctuations and liquidity management.

FHLB stock decreased $8.3 million to $232.1 million at June 30, 2024 from $240.4 million at March 31, 2024. The decrease is a result of stock redemptions by the FHLB related to a decrease in the balance of FHLB advances. The FHLB has collateral requirements on funds borrowed that dictate the minimum amount of stock owned at any given time.

Loans held for sale increased $20.7 million, or 213%, to $30.4 million at June 30, 2024 from $9.7 million at March 31, 2024 due to an increase in both loans committed to forward sales and loans identified for future sale.

Loans held for investment, net of allowance and deferred loan expenses, increased $40.3 million, or less than 1%, to $15.19 billion at June 30, 2024 from $15.15 billion at March 31, 2024. During the quarter ended June 30, 2024, the home equity loans and lines of credit portfolio increased $269.2 million and residential core mortgage loans decreased $225.3 million. Repayments and sales of residential mortgage loans held for investment outpaced originations during the quarter ended June 30, 2024. The volume of mortgage loan originations remains low due to a relatively high interest rate environment, resulting in minimal refinance activity.

Deposits increased by $90.3 million to $10.03 billion at June 30, 2024, compared to $9.94 billion at March 31, 2024, consisting of a $226.4 million increase in certificates of deposit ("CDs") and decreases of $79.8 million in savings accounts, $31.5 million in money market deposit accounts, and $25.6 million in checking accounts.

Borrowed funds decreased $126.1 million to $4.83 billion at June 30, 2024 from $4.96 billion at March 31, 2024, 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 $61.4 million for the nine months ended June 30, 2024, an increase of $5.7 million compared to net income of $55.7 million for the nine months ended June 30, 2023. The change was primarily due to a decrease in non-interest expense and an increase in the release of provision for credit losses, partially offset by a decrease in net interest income.

Net interest income decreased $3.5 million, or 1.64%, to $209.7 million for the nine months ended June 30, 2024 compared to $213.2 million for the nine months ended June 30, 2023. The decrease in net interest income was primarily due to an increase in the weighted average cost of interest-bearing liabilities, mainly certificates of deposit. The weighted average cost of certificates of deposit increased 141 basis points between the two periods as balances migrated from savings and checking accounts to higher yielding certificates of deposits and accounts established in a lower interest rate environment repriced to higher yields at maturity. The weighted average yield of interest-earning assets, primarily loans, increased between the periods. The interest rate spread was 1.39% for the nine months ended June 30, 2024, a 21 basis point decrease from 1.60% for the nine months ended June 30, 2023. The net interest margin was 1.69% for the nine months ended June 30, 2024 compared to 1.82% for the prior year period.

During the nine months ended June 30, 2024, there was a $2.5 million release of provision for credit losses compared to a release of $2.0 million for the nine months ended June 30, 2023. Continued recoveries of loan amounts previously charged off and low levels of current loan charge-offs resulted in the release of provision. Net loan recoveries totaled $3.6 million for the nine months ended June 30, 2024 and $4.6 million for the same period in the prior year.

The total allowance for credit losses at June 30, 2024 was $95.7 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 $28.2 million and $27.5 million in liabilities for unfunded commitments at June 30, 2024 and September 30, 2023, respectively. Total loan delinquencies increased to $28.6 million, or 0.19% of total loans receivable, at June 30, 2024 from $28.3 million, or 0.19% of totals loans receivable, at March 31, 2024 and $23.4 million, or 0.15% of total loans receivable, at September 30, 2023. Non-accrual loans increased to $35.4 million, or 0.23% of total loans receivable, at June 30, 2024 from $35.3 million, or 0.23% of total loans receivable, at March 31, 2024 and $31.9 million, or 0.21% of total loans receivable, at September 30, 2023.

Total non-interest expense decreased $8.3 million, or 5%, to $153.3 million for the nine months ended June 30, 2024, from $161.6 million for the nine months ended June 30, 2023 and included decreases of $7.0 million in marketing costs and $2.6 million in salaries and employee benefits, partially offset by an increase of $1.2 million in federal ("FDIC") insurance premiums. The decrease in salaries and employee benefits was 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, partially offset by a decrease during the third fiscal quarter of 2024 related to recent changes in accounting for TDRs.

Total assets increased by $117.0 million, or 1%, to $17.03 billion at June 30, 2024 from $16.92 billion at September 30, 2023. The increase was mainly the result of increases in cash and cash equivalents, loans held for sale and loans held for investment, partially offset by a decrease in other assets.

Cash and cash equivalents increased $93.7 million, or 20%, to $560.4 million at June 30, 2024 from $466.7 million at September 30, 2023 due to normal fluctuations and liquidity management.

Loans held for sale increased $27.1 million, or 821%, to $30.4 million at June 30, 2024 from $3.3 million at June 30, 2023 due to an increase in both loans committed to forward sales and loans identified for future sale.

Loans held for investment, net of allowance and deferred loan expenses, increased $24.2 million, or less than 1%, to $15.19 billion at June 30, 2024 from $15.17 billion at September 30, 2023. Home equity loans and lines of credit increased $558.3 million to $3.59 billion and the residential mortgage loan portfolio decreased $532.6 million to $11.55 billion. Loans originated and purchased during the nine months ended June 30, 2024 included $598.7 million of residential mortgage loans and $1.62 billion of equity loans and lines of credit compared to $1.31 billion of residential mortgage loans and $1.24 billion of equity loans and lines of credit originated or purchased during the nine months ended June 30, 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 22% adjustable rate loans during the nine months ended June 30, 2024. There were $190.7 million of residential mortgage loans, primarily long-term fixed-rate loans, sold during the nine months ended June 30, 2024, including those in contracts pending settlement at the end of the period, with a net gain on sale of $1.6 million. During the nine months ended June 30, 2023, $58.1 million of residential mortgage loans were sold with a net gain on sale of $0.6 million.

Other assets decreased $34.2 million, or 29.16%, to $83.1 million at June 30, 2024 from $117.3 million at September 30, 2023. The decrease was mainly due to a decrease in the swap margin receivable related to changes in market values of swap instruments and the impact of those changes on daily settlement transactions.

Deposits increased $576.2 million, or 6%, to $10.03 billion at June 30, 2024 from $9.45 billion at September 30, 2023. The increase was the result of a $1.09 billion increase in certificates of deposit, partially offset by a $274.0 million decrease in savings accounts, a $138.1 million decrease in money market deposit accounts and a $118.0 million decrease in checking accounts. There was $1.21 billion in brokered deposits at June 30, 2024 compared to $1.16 billion at September 30, 2023. At June 30, 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 2.8 years.

Borrowed funds decreased $444.3 million, or 8%, to $4.83 billion at June 30, 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 June 30, 2024, all from the FHLB, included $1.81 billion of term advances with a weighted average maturity of approximately 2.0 years, and $3.00 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.2 years. Additional borrowing capacity at the FHLB was $2.68 billion at June 30, 2024.

Borrowers’ advances for insurance and taxes decreased $57.7 million, or 46%, to $66.8 million at June 30, 2024 from $124.4 million at September 30, 2023. This decrease was primarily related to the timing of real estate tax payments that are collected from borrowers and remitted to various taxing agencies when due.

Accrued expenses and other liabilities increased $68.0 million, or 60%, to $180.9 million at June 30, 2024 from $112.9 million at September 30, 2023. This increase was mainly due to in-transit real estate tax payments that had not yet cleared at the reporting date, slightly offset by a decrease in deferred tax liability.

Total shareholders' equity decreased $12.3 million, or 1%, to $1.92 billion at June 30, 2024 from $1.93 billion at September 30, 2023. Activity reflects $61.4 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 $42.6 million net decrease in accumulated other comprehensive income, dividends paid of $44.2 million and net positive adjustments of $5.2 million related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income was primarily due to a net decrease in unrealized gains and losses on swap contracts. There were no stock repurchases during the nine months ended June 30, 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 June 30, 2024.

The Company declared and paid a quarterly dividend of $0.2825 per share during each of the first, second and third quarters of 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 9, 2024 member vote, 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 9, 2025). The MHC has filed a notice with, and a request for non-objection from, the Federal Reserve Bank of Cleveland for the proposed dividend waiver. Both the non-objection from the Federal Reserve Bank and the timing of the non-objection are unknown at this point. The MHC has conducted the member vote to approve the dividend waiver each of the past eleven years under Federal Reserve regulations and for each of those eleven 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 June 30, 2024 all of the Company's capital ratios exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 10.82%, its Common Equity Tier 1 and Tier 1 ratios were each 18.82% and its total capital ratio was 19.55%.

Presentation slides as of June 30, 2024 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning July 31, 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, two lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of June 30, 2024, the Company’s assets totaled $17.03 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)

	June 30, 2024			March 31, 2024			September 30, 2023
ASSETS
Cash and due from banks	$	29,411		$	27,381		$	29,134
Other interest-earning cash equivalents		531,024			566,953			437,612
Cash and cash equivalents		560,435			594,334			466,746
Investment securities available for sale		522,967			520,172			508,324
Mortgage loans held for sale		30,391			9,698			3,260
Loans held for investment, net:
Mortgage loans		15,189,683			15,152,032			15,177,844
Other loans		5,070			4,709			4,411
Deferred loan expenses, net		62,738			61,047			60,807
Allowance for credit losses on loans		(67,529	)		(68,169	)		(77,315	)
Loans, net		15,189,962			15,149,619			15,165,747
Mortgage loan servicing rights, net		7,591			7,547			7,400
Federal Home Loan Bank stock, at cost		232,083			240,365			247,098
Real estate owned, net		431			230			1,444
Premises, equipment, and software, net		33,665			33,885			34,708
Accrued interest receivable		58,615			56,887			53,910
Bank owned life insurance contracts		315,710			313,458			312,072
Other assets		83,090			90,955			117,270
TOTAL ASSETS	$	17,034,940		$	17,017,150		$	16,917,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	10,025,977		$	9,935,631		$	9,449,820
Borrowed funds		4,829,365			4,955,438			5,273,637
Borrowers’ advances for insurance and taxes		66,757			99,492			124,417
Principal, interest, and related escrow owed on loans serviced		16,867			25,946			29,811
Accrued expenses and other liabilities		180,910			93,146			112,933
Total liabilities		15,119,876			15,109,653			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		1,753,074			1,751,960			1,755,027
Treasury stock, at cost		(772,195	)		(772,195	)		(776,101	)
Unallocated ESOP shares		(23,834	)		(24,917	)		(27,084	)
Retained earnings—substantially restricted		912,082			906,908			886,984
Accumulated other comprehensive income		42,614			42,418			85,212
Total shareholders’ equity		1,915,064			1,907,497			1,927,361
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	17,034,940		$	17,017,150		$	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
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	166,268		$	162,970		$	162,035		$	154,763		$	144,347
Investment securities available for sale		4,663			4,476			4,395			4,141			3,712
Other interest and dividend earning assets		13,975			16,047			10,729			9,836			8,598
Total interest and dividend income		184,906			183,493			177,159			168,740			156,657
INTEREST EXPENSE:
Deposits		75,521			72,685			64,326			55,565			48,905
Borrowed funds		40,112			39,430			43,741			42,812			38,973
Total interest expense		115,633			112,115			108,067			98,377			87,878
NET INTEREST INCOME		69,273			71,378			69,092			70,363			68,779
PROVISION (RELEASE) FOR CREDIT LOSSES		(500	)		(1,000	)		(1,000	)		500			—
NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES		69,773			72,378			70,092			69,863			68,779
NON-INTEREST INCOME:
Fees and service charges, net of amortization		2,097			1,845			1,748			2,061			1,919
Net gain (loss) on the sale of loans		723			442			481			(119	)		21
Increase in and death benefits from bank owned life insurance contracts		2,254			2,193			3,191			2,204			2,790
Other		1,171			1,242			895			954			1,113
Total non-interest income		6,245			5,722			6,315			5,100			5,843
NON-INTEREST EXPENSE:
Salaries and employee benefits		26,845			27,501			27,116			28,660			25,332
Marketing services		4,867			5,099			4,431			3,881			7,023
Office property, equipment and software		7,008			7,303			6,845			6,886			7,246
Federal insurance premium and assessments		3,258			4,013			3,778			3,629			3,574
State franchise tax		1,244			1,238			1,176			1,185			1,230
Other expenses		7,566			7,044			6,931			7,243			8,472
Total non-interest expense		50,788			52,198			50,277			51,484			52,877
INCOME BEFORE INCOME TAXES		25,230			25,902			26,130			23,479			21,745
INCOME TAX EXPENSE		5,277			5,189			5,423			3,933			4,142
NET INCOME	$	19,953		$	20,713		$	20,707		$	19,546		$	17,603
Earnings per share - basic and diluted	$	0.07		$	0.07		$	0.07		$	0.07		$	0.06
Weighted average shares outstanding
Basic		278,291,376			278,183,041			277,841,526			277,589,775			277,472,312
Diluted		279,221,360			279,046,837			279,001,898			278,826,441			278,590,810

TFS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share and per share data)

	For the Nine Months Ended
	June 30,
	2024			2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	491,273		$	410,847
Investment securities available for sale		13,534			10,229
Other interest and dividend earning assets		40,751			22,103
Total interest and dividend income		545,558			443,179
INTEREST EXPENSE:
Deposits		212,532			118,636
Borrowed funds		123,283			111,339
Total interest expense		335,815			229,975
NET INTEREST INCOME		209,743			213,204
PROVISION (RELEASE) FOR CREDIT LOSSES		(2,500	)		(2,000	)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		212,243			215,204
NON-INTEREST INCOME:
Fees and service charges, net of amortization		5,690			5,779
Net gain on the sale of loans		1,646			617
Increase in and death benefits from bank owned life insurance contracts		7,638			7,151
Other		3,308			2,782
Total non-interest income		18,282			16,329
NON-INTEREST EXPENSE:
Salaries and employee benefits		81,462			84,125
Marketing services		14,397			21,407
Office property, equipment and software		21,156			20,848
Federal insurance premium and assessments		11,049			9,823
State franchise tax		3,658			3,706
Other expenses		21,541			21,736
Total non-interest expense		153,263			161,645
INCOME BEFORE INCOME TAXES		77,262			69,888
INCOME TAX EXPENSE		15,889			14,184
NET INCOME	$	61,373		$	55,704
Earnings per share - basic and diluted	$	0.22		$	0.20
Weighted average shares outstanding
Basic		278,104,352			277,384,689
Diluted		279,072,087			278,507,602

TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited)

	Three Months Ended								Three Months Ended								Three Months Ended
	June 30, 2024								March 31, 2024								June 30, 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	$	618,986		$	8,500		5.49	%	$	720,657		$	9,919		5.51	%	$	350,574		$	4,481		5.11	%
Investment securities		72,161			906		5.02	%		72,091			907		5.03	%		24,046			320		5.32	%
Mortgage-backed securities		452,224			3,757		3.32	%		448,653			3,569		3.18	%		470,457			3,392		2.88	%
Loans (2)		15,175,535			166,268		4.38	%		15,163,185			162,970		4.30	%		14,676,829			144,347		3.93	%
Federal Home Loan Bank stock		235,755			5,475		9.29	%		244,560			6,128		10.02	%		235,177			4,117		7.00	%
Total interest-earning assets		16,554,661			184,906		4.47	%		16,649,146			183,493		4.41	%		15,757,083			156,657		3.98	%
Noninterest-earning assets		513,931								505,145								543,310
Total assets	$	17,068,592							$	17,154,291							$	16,300,393
Interest-bearing liabilities:
Checking accounts	$	866,170			94		0.04	%	$	887,584			98		0.04	%	$	1,064,738			1,317		0.49	%
Savings accounts		1,437,406			4,967		1.38	%		1,561,331			5,598		1.43	%		1,890,427			8,087		1.71	%
Certificates of deposit		7,654,612			70,460		3.68	%		7,548,314			66,989		3.55	%		6,042,798			39,501		2.61	%
Borrowed funds		4,892,621			40,112		3.28	%		5,033,253			39,430		3.13	%		5,175,982			38,973		3.01	%
Total interest-bearing liabilities		14,850,809			115,633		3.11	%		15,030,482			112,115		2.98	%		14,173,945			87,878		2.48	%
Noninterest-bearing liabilities		261,741								212,206								264,952
Total liabilities		15,112,550								15,242,688								14,438,897
Shareholders’ equity		1,956,042								1,911,603								1,861,496
Total liabilities and shareholders’ equity	$	17,068,592							$	17,154,291							$	16,300,393
Net interest income				$	69,273							$	71,378							$	68,779
Interest rate spread (1)(3)							1.36	%							1.43	%							1.50	%
Net interest-earning assets (4)	$	1,703,852							$	1,618,664							$	1,583,138
Net interest margin (1)(5)					1.67	%							1.71	%							1.75	%
Average interest-earning assets to average interest-bearing liabilities		111.47	%							110.77	%							111.17	%
Selected performance ratios:
Return on average assets (1)					0.47	%							0.48	%							0.43	%
Return on average equity (1)					4.08	%							4.33	%							3.78	%
Average equity to average assets					11.46	%							11.14	%							11.42	%

(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)

	Nine Months Ended								Nine Months Ended
	June 30, 2024								June 30, 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	$	579,383		$	23,543		5.42	%	$	351,742		$	11,677		4.43	%
Investment securities		69,677			2,663		5.10	%		10,438			342		4.37	%
Mortgage-backed securities		448,429			10,871		3.23	%		470,108			9,887		2.80	%
Loans (2)		15,190,356			491,273		4.31	%		14,530,428			410,847		3.77	%
Federal Home Loan Bank stock		250,285			17,208		9.17	%		228,318			10,426		6.09	%
Total interest-earning assets		16,538,130			545,558		4.40	%		15,591,034			443,179		3.79	%
Noninterest-earning assets		524,179								518,875
Total assets	$	17,062,309							$	16,109,909
Interest-bearing liabilities:
Checking accounts	$	897,190			310		0.05	%	$	1,126,064			5,956		0.71	%
Savings accounts		1,573,401			17,477		1.48	%		1,774,965			16,822		1.26	%
Certificates of deposit		7,350,136			194,745		3.53	%		6,042,061			95,858		2.12	%
Borrowed funds		5,051,371			123,283		3.25	%		5,053,965			111,339		2.94	%
Total interest-bearing liabilities		14,872,098			335,815		3.01	%		13,997,055			229,975		2.19	%
Noninterest-bearing liabilities		250,916								243,823
Total liabilities		15,123,014								14,240,878
Shareholders’ equity		1,939,295								1,869,031
Total liabilities and shareholders’ equity	$	17,062,309							$	16,109,909
Net interest income				$	209,743							$	213,204
Interest rate spread (1)(3)							1.39	%							1.60	%
Net interest-earning assets (4)	$	1,666,032							$	1,593,979
Net interest margin (1)(5)					1.69	%							1.82	%
Average interest-earning assets to average interest-bearing liabilities		111.20	%							111.39	%
Selected performance ratios:
Return on average assets (1)					0.48	%							0.46	%
Return on average equity (1)					4.22	%							3.97	%
Average equity to average assets					11.37	%							11.60	%

(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/20240730559233/en/

Jennifer Rosa

(216) 429-5037

Source: Third Federal Savings and Loan

FAQ

What was TFS Financial's (TFSL) net income for Q3 2024?

TFS Financial (TFSL) reported net income of $20.0 million for the quarter ended June 30, 2024.

How much did TFS Financial's (TFSL) retail deposits grow in Q3 2024?

TFS Financial (TFSL) saw retail deposit growth of 6% in the last three months of Q3 2024.

What was the average yield of TFS Financial's (TFSL) loan originations in Q3 2024?

TFS Financial's (TFSL) $2.2 billion in loan originations had an average yield of 7.31% in Q3 2024.

How did TFS Financial's (TFSL) expenses change compared to 2023?

TFS Financial (TFSL) reported a 5% reduction in expenses compared to 2023.

What was TFS Financial's (TFSL) Tier I capital ratio in Q3 2024?

TFS Financial (TFSL) reported a Tier I capital ratio of nearly 11% in Q3 2024.

TFS Financial Sees Positives Continue in Third Fiscal Quarter

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What was TFS Financial's (TFSL) net income for Q3 2024?

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