Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Growth in Loan Originations, Strong Borrower Credit Highlight Successful Year for TFS Financial Corporation By: Third Federal Savings and Loan via Business Wire October 28, 2021 at 16:19 PM EDT 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 three months and fiscal year ended September 30, 2021. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211028006198/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) The Company reported net income of $17.0 million for the quarter ended September 30, 2021 compared to net income of $13.6 million for the quarter ended September 30, 2020. The improvement when compared to the prior year quarter included an increase in net interest income and lower non-interest expense, partially offset by lower net gain on the sale of loans. Net income of $81.0 million was reported for the fiscal year ended September 30, 2021 compared to net income of $83.3 million for the fiscal year ended September 30, 2020. A decline in net interest income and higher non-interest expense for the current fiscal year offset the benefit of higher non-interest income and releases from the credit loss provision. “Even after a year of unprecedented loan activity in 2020, our originations in 2021 were up 20 percent,” said Chairman and CEO, Marc A. Stefanski. “In addition, the credit profile of our current customers, and those with mortgages in the pipeline, has been another source of strength during both this last quarter and our fiscal year.” Loan origination volumes remained high, as there were $3.63 billion of first mortgage loans originated during the fiscal year ended September 30, 2021 and $3.08 billion for the fiscal year ended September 30, 2020. New equity line of credit commitments were $1.65 billion and $1.23 billion, respectively, for the fiscal years ended September 30, 2021 and September 30, 2020. During the fiscal year ended September 30, 2021, $762.3 million of loans were sold for a net gain of $33.1 million compared to $844.3 million sold for a net gain of $28.4 million during the fiscal year ended September 30, 2020. By comparison, loan sales were $117.3 million for a gain of $1.9 million during the fiscal year ended September 30, 2019. Net interest income increased $0.3 million, or 0.6%, to $57.4 million for the quarter ended September 30, 2021 from $57.1 million for the quarter ended June 30, 2021. Net interest income was $50.2 million for the quarter ended September 30, 2020. Net interest income decreased by $10.7 million, or 4.4%, to $231.6 million, for the fiscal year ended September 30, 2021 from $242.3 million for the fiscal year ended September 30, 2020. The decrease between fiscal years was primarily due to lower yields on loans as many borrowers refinanced to take advantage of the lower rate environment and a decrease in the average balances of loans due to loan sales and payoffs. In addition, the increase in lower yielding cash equivalent investments was a detriment to the overall yield on assets. Funding costs declined, partially offsetting the decrease in yield, through a reduction in the average balance of borrowed funds, including maturities and prior year terminations of Federal Home Loan Bank ("FHLB") advances and their related swap contracts; the repricing of certificates of deposit, as they mature, to market rates of interest; and a heightened migration to lower-priced non-maturity deposit accounts from certificates of deposit due to historically low yield differentials. The quarter and year ended September 30, 2020 included $7.8 million of additional interest expense recognized on the terminations of advances and related swap contracts. The interest rate spread was 1.52% for both the fiscal years ended September 30, 2021 and September 30, 2020. The net interest margin was 1.66% and 1.69% for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. During the quarter ended September 30, 2021, a $2.0 million release of provision from the allowance for credit losses was recognized, bringing the total release of provision for the fiscal year to $9.0 million. A provision of $3.0 million was recorded for the prior fiscal year, with no provision during the quarter ended September 30, 2020. Releases from the allowance for credit losses during the recent fiscal year were primarily due to recoveries exceeding charge-offs and improvements in the economic trends and forecasts used to estimate credit losses for the reasonable and supportable period. On October 1, 2020, the Company adopted the Current Expected Credit Loss ("CECL") methodology and recognized a $46.2 million increase to the allowance for credit losses and a related $35.8 million reduction to retained earnings, net of tax. The allowance for credit losses was $89.3 million, or 0.71% of total loans receivable, at September 30, 2021 and included a $25.0 million liability for unfunded commitments. At September 30, 2020, the allowance for credit losses was $46.9 million, or 0.36% of total loans receivable. The Company recorded $1.5 million and $5.2 million of net loan recoveries for the quarter and fiscal year ended September 30, 2021, respectively, compared to $1.4 million and $5.0 million of net loan recoveries for the quarter and fiscal year ended September 30, 2020, respectively. Total loan delinquencies decreased $3.5 million to $24.7 million, or 0.20% of total loans receivable, at September 30, 2021 from $28.2 million, or 0.21% of total loans receivable, at September 30, 2020. Delinquencies at September 30, 2021 included a $2.1 million decrease in delinquencies on residential mortgages and a $1.3 million decrease on home equity loans and lines of credit when compared to September 30, 2020. Non-accrual loans decreased $9.4 million to $44.0 million, or 0.35% of total loans, at September 30, 2021 from $53.4 million, or 0.41% of total loans, at September 30, 2020. At September 30, 2021, there were $21.8 million, or 0.17% of total loans receivable, in COVID-19 forbearance plans compared to $165.6 million, or 1.26% of total loans receivable, at September 30, 2020. Total troubled debt restructurings decreased $14.2 million, to $127.1 million at September 30, 2021, from $141.3 million at September 30, 2020. COVID-19 forbearance plans are not generally classified as troubled debt restructurings. Non-interest income decreased $8.4 million to $8.7 million for the quarter ended September 30, 2021 from $17.1 million for the quarter ended September 30, 2020. The decrease was primarily due to a $7.2 million decrease in net gain on the sale of loans and a $1.1 million reduction in the fair value of interest rate lock commitments on mortgage loans originated for sale, both related to pricing movement in the secondary mortgage market. Non-interest income increased $2.0 million to $55.3 million for the fiscal year ended September 30, 2021 from $53.3 million for the fiscal year ended September 30, 2020, mainly due to increases in the net gain on the sale of loans and in the cash surrender value and death benefits on bank owned life insurance contracts. These increases were offset by a decrease in other non-interest income which, in the previous fiscal year, included $4.7 million of net gain on the sale of commercial property. Total non-interest expense decreased $3.2 million to $47.4 million for quarter ended September 30, 2021 from $50.6 million for the quarter ended September 30, 2020, primarily due to a $3.5 million decrease in other operating expenses. This included a $2.2 million net positive change in pension expense/benefit and no fees for termination of borrowings and swap contracts compared to $1.1 million in fees during the same quarter last year. Total non-interest expense increased $3.5 million to $195.8 million for the fiscal year ended September 30, 2021 from $192.3 million for the fiscal year ended September 30, 2020, with increases in salary and employee benefits and marketing expense being the main reason. The increase in salary and benefits was spread between associate compensation, group health insurance, stock benefit plan expense, and a one-time $1,500 after-tax bonus paid to each associate during the first quarter of fiscal year 2021 in recognition of special efforts made during the pandemic crisis. The increase in marketing expense was timing related, as some marketing efforts were delayed during the previous fiscal year, in response to COVID-19. Total assets decreased by $584.8 million, or 4.0%, to $14.06 billion at September 30, 2021 from $14.64 billion at September 30, 2020. This change was mainly due to the combination of loan sales and principal repayments on loans exceeding the total of new loan originations and the impact of adopting CECL, partially offset by an increase in bank owned life insurance contracts. The combination of loans held for investment, net of allowance and deferred loan expenses, and mortgage loans held for sale decreased $622.1 million, or 4.7%, to $12.52 billion at September 30, 2021 from $13.14 billion at September 30, 2020, reflecting the impact of prepayments and increased loan sales during the fiscal year. The residential core mortgage loan portfolio, including loans held for sale, decreased $587.6 million during the fiscal year, to $10.28 billion. At September 30, 2021, 45% of the residential mortgage loan portfolio were adjustable rate mortgages and 13% were fixed rate mortgages originated with terms of 10 years or less. The drawn balances of the home equity loans and lines of credit portfolio decreased $18.0 million, to $2.21 billion, during the fiscal year ended September 30, 2021. Total bank owned life insurance contracts increased $74.4 million, to $297.3 million at September 30, 2021, from $222.9 million at September 30, 2020, primarily due to $70 million of additional premiums placed during the current fiscal year. Deposits decreased $231.9 million, or 2.5%, to $8.99 billion at September 30, 2021 from $9.23 billion at September 30, 2020. The decrease was the result of a $567.5 million decrease in our certificates of deposit ("CDs"), partially offset by a $136.2 million increase in our checking accounts, a $157.1 million increase in our savings accounts and $43.5 million of growth in our money market deposit accounts, for the fiscal year ended September 30, 2021. Total deposits included $492.0 million and $553.9 million of brokered CDs at September 30, 2021 and September 30, 2020, respectively. Borrowed funds, all from the FHLB, decreased $429.9 million, or 12.2%, to $3.09 billion at September 30, 2021 from $3.52 billion at September 30, 2020. Included in the decrease were $525.0 million of 90 day advances that were utilized for longer term interest rate swap contracts that matured during the year and were paid off from available cash, partially offset by a $95.2 million net increase in long term advances. Total shareholders' equity increased $60.4 million, or 3.6%, to $1.73 billion at September 30, 2021 from $1.67 billion at September 30, 2020. Activity reflects $81.0 million of net income, a $64.2 million decrease in accumulated other comprehensive loss and $8.1 million of positive adjustments related to our stock compensation and employee stock ownership plans, reduced by $57.1 million of quarterly dividends and a $35.8 million provision to the allowance for credit losses, net of tax, with the adoption of CECL. The decrease in accumulated other comprehensive loss is primarily due to a net positive change in unrealized gains and losses on swap contracts. No shares of our common stock were repurchased during the fiscal year ended September 30, 2021. The Company declared and paid a quarterly dividend of $0.2825 per share during the fourth fiscal quarter of 2021 and a quarterly dividend of $0.28 per share during the first, second and third fiscal quarters of 2021. 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 receipt of its share of each dividend paid. Under current 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 13, 2021 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive the 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 13, 2022), including a total of up to $0.8475 during the three quarters ending December 31, 2021, March 31, 2022 and June 30, 2022, to be declared at the discretion of the Company's board of directors. The MHC has conducted the member vote to approve the dividend waiver each of the past eight years under Federal Reserve regulations and for each of those eight years, approximately 97% of the votes cast were in favor of the waiver. The Association operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At September 30, 2021 all of the Association's capital ratios substantially exceed the amounts required for the Association to be considered "well capitalized" for regulatory capital purposes. The Association’s Tier 1 leverage ratio was 11.15%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 20.43% and its total capital ratio was 21.00%. Additionally, the Company's Tier 1 leverage ratio was 12.65%, its Common Equity Tier 1 and Tier 1 ratios were each 23.18% and its total capital ratio was 23.75%. The current capital ratios of the Association reflect the dilutive impact of $55.0 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2020. Because of its intercompany nature, these dividends had no impact on the Company's capital ratios or its consolidated statement of condition. Presentation slides as of September 30, 2021 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning October 29, 2021. 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 80th anniversary in May, 2018. Third Federal, which lends in 25 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, seven lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of September 30, 2021, the Company’s assets totaled $14.06 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 asset 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; inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments; 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; 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, and regulatory and compliance risk; our ability to access cost-effective funding; 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 Financial Accounting Standards Board or the Public Company Accounting Oversight Board; 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, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any; 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 and the FRS and changes in the level of government support of housing finance; 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, or compensation and benefit plans 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; civic 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, 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) September 30, 2021 September 30, 2020 ASSETS Cash and due from banks $ 27,346 $ 25,270 Other interest-earning cash equivalents 460,980 472,763 Cash and cash equivalents 488,326 498,033 Investment securities available for sale (amortized cost $420,542 and $447,384, respectively) 421,783 453,438 Mortgage loans held for sale ($0 and $36,078 measured at fair value, respectively) 8,848 36,871 Loans held for investment, net: Mortgage loans 12,525,687 13,104,959 Other loans 2,778 2,581 Deferred loan expenses, net 44,859 42,459 Allowance for credit losses on loans (64,289 ) (46,937 ) Loans, net 12,509,035 13,103,062 Mortgage loan servicing rights, net 8,941 7,860 Federal Home Loan Bank stock, at cost 162,783 136,793 Real estate owned, net 289 185 Premises, equipment, and software, net 37,420 41,594 Accrued interest receivable 31,107 36,634 Bank owned life insurance contracts 297,332 222,919 Other assets 91,586 104,832 TOTAL ASSETS $ 14,057,450 $ 14,642,221 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 8,993,605 $ 9,225,554 Borrowed funds 3,091,815 3,521,745 Borrowers’ advances for insurance and taxes 109,633 111,536 Principal, interest, and related escrow owed on loans serviced 41,476 45,895 Accrued expenses and other liabilities 88,641 65,638 Total liabilities 12,325,170 12,970,368 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; 280,761,299 and 280,150,006 outstanding at September 30, 2021 and September 30, 2020, respectively 3,323 3,323 Paid-in capital 1,746,887 1,742,714 Treasury stock, at cost; 51,557,451 and 52,168,744 shares at September 30, 2021 and September 30, 2020, respectively (768,035 ) (767,649 ) Unallocated ESOP shares (35,751 ) (40,084 ) Retained earnings—substantially restricted 853,657 865,514 Accumulated other comprehensive loss (67,801 ) (131,965 ) Total shareholders’ equity 1,732,280 1,671,853 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 14,057,450 $ 14,642,221 TFS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except share and per share data) For the Three Months Ended For the Year Ended September 30, September 30, 2021 2020 2021 2020 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 92,002 $ 103,430 $ 381,887 $ 440,697 Investment securities available for sale 1,041 1,535 3,822 9,707 Other interest and dividend earning assets 1,033 797 3,642 4,894 Total interest and dividend income 94,076 105,762 389,351 455,298 INTEREST EXPENSE: Deposits 21,617 31,379 97,319 140,242 Borrowed funds 15,061 24,217 60,402 72,788 Total interest expense 36,678 55,596 157,721 213,030 NET INTEREST INCOME 57,398 50,166 231,630 242,268 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) — (9,000 ) 3,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 59,398 50,166 240,630 239,268 NON-INTEREST INCOME: Fees and service charges, net of amortization 2,156 2,363 9,602 8,798 Net gain on the sale of loans 4,305 11,536 33,082 28,443 Increase in and death benefits from bank owned life insurance contracts 2,146 1,572 9,961 7,153 Other 74 1,581 2,654 8,857 Total non-interest income 8,681 17,052 55,299 53,251 NON-INTEREST EXPENSE: Salaries and employee benefits 26,912 25,967 108,867 104,008 Marketing services 4,043 4,349 19,174 16,512 Office property, equipment and software 6,453 6,439 25,710 25,296 Federal insurance premium and assessments 2,233 2,438 9,085 10,625 State franchise tax 1,202 1,176 4,663 4,690 Other expenses 6,603 10,194 28,336 31,143 Total non-interest expense 47,446 50,563 195,835 192,274 INCOME BEFORE INCOME TAXES 20,633 16,655 100,094 100,245 INCOME TAX EXPENSE 3,618 3,077 19,087 16,928 NET INCOME $ 17,015 $ 13,578 $ 81,007 $ 83,317 Earnings per share Basic $ 0.06 $ 0.05 $ 0.29 $ 0.30 Diluted $ 0.06 $ 0.05 $ 0.29 $ 0.29 Weighted average shares outstanding Basic 276,982,904 276,069,983 276,694,594 275,859,660 Diluted 278,880,379 277,704,691 278,576,254 277,803,058 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 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 $ 570,903 $ 221 0.15 % $ 466,487 $ 118 0.10 % Mortgage-backed securities 417,320 1,041 1.00 % 484,596 1,535 1.27 % Loans (2) 12,544,760 92,002 2.93 % 13,265,564 103,430 3.12 % Federal Home Loan Bank stock 162,783 812 2.00 % 136,793 679 1.99 % Total interest-earning assets 13,695,766 94,076 2.75 % 14,353,440 105,762 2.95 % Noninterest-earning assets 533,988 580,574 Total assets $ 14,229,754 $ 14,934,014 Interest-bearing liabilities: Checking accounts $ 1,117,897 263 0.09 % $ 981,012 310 0.13 % Savings accounts 1,805,394 645 0.14 % 1,588,923 1,019 0.26 % Certificates of deposit 6,144,461 20,709 1.35 % 6,681,372 30,050 1.80 % Borrowed funds 3,146,515 15,061 1.91 % 3,657,533 24,217 2.65 % Total interest-bearing liabilities 12,214,267 36,678 1.20 % 12,908,840 55,596 1.72 % Noninterest-bearing liabilities 289,573 337,437 Total liabilities 12,503,840 13,246,277 Shareholders’ equity 1,725,914 1,687,737 Total liabilities and shareholders’ equity $ 14,229,754 $ 14,934,014 Net interest income $ 57,398 $ 50,166 Interest rate spread (1)(3) 1.55 % 1.23 % Net interest-earning assets (4) $ 1,481,499 $ 1,444,600 Net interest margin (1)(5) 1.68 % 1.40 % Average interest-earning assets to average interest-bearing liabilities 112.13 % 111.19 % Selected performance ratios: Return on average assets (1) 0.48 % 0.36 % Return on average equity (1) 3.94 % 3.22 % Average equity to average assets 12.13 % 11.30 % (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) Year Ended Year Ended September 30, 2021 September 30, 2020 Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost (Dollars in thousands) Interest-earning assets: Interest-earning cash equivalents $ 567,035 $ 673 0.12 % $ 307,902 $ 1,909 0.62 % Mortgage-backed securities 428,590 3,822 0.89 % 527,195 9,707 1.84 % Loans (1) 12,800,542 381,887 2.98 % 13,366,447 440,697 3.30 % Federal Home Loan Bank stock 155,322 2,969 1.91 % 120,011 2,985 2.49 % Total interest-earning assets 13,951,489 389,351 2.79 % 14,321,555 455,298 3.18 % Noninterest-earning assets 532,786 540,421 Total assets $ 14,484,275 $ 14,861,976 Interest-bearing liabilities: Checking accounts $ 1,079,699 1,140 0.11 % $ 917,552 1,477 0.16 % Savings accounts 1,742,042 2,992 0.17 % 1,530,977 7,775 0.51 % Certificates of deposit 6,339,412 93,187 1.47 % 6,621,289 130,990 1.98 % Borrowed funds 3,303,925 60,402 1.83 % 3,785,026 72,788 1.92 % Total interest-bearing liabilities 12,465,078 157,721 1.27 % 12,854,844 213,030 1.66 % Noninterest-bearing liabilities 321,958 298,520 Total liabilities 12,787,036 13,153,364 Shareholders’ equity 1,697,239 1,708,612 Total liabilities and shareholders’ equity $ 14,484,275 $ 14,861,976 Net interest income $ 231,630 $ 242,268 Interest rate spread (2) 1.52 % 1.52 % Net interest-earning assets (3) $ 1,486,411 $ 1,466,711 Net interest margin (4) 1.66 % 1.69 % Average interest-earning assets to average interest-bearing liabilities 111.92 % 111.41 % Selected performance ratios: Return on average assets 0.56 % 0.56 % Return on average equity 4.77 % 4.88 % Average equity to average assets 11.72 % 11.50 % (1) Loans include both mortgage loans held for sale and loans held for investment. (2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) 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/20211028006198/en/Contacts Jennifer Rosa (216) 429-5037 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Growth in Loan Originations, Strong Borrower Credit Highlight Successful Year for TFS Financial Corporation By: Third Federal Savings and Loan via Business Wire October 28, 2021 at 16:19 PM EDT 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 three months and fiscal year ended September 30, 2021. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211028006198/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) The Company reported net income of $17.0 million for the quarter ended September 30, 2021 compared to net income of $13.6 million for the quarter ended September 30, 2020. The improvement when compared to the prior year quarter included an increase in net interest income and lower non-interest expense, partially offset by lower net gain on the sale of loans. Net income of $81.0 million was reported for the fiscal year ended September 30, 2021 compared to net income of $83.3 million for the fiscal year ended September 30, 2020. A decline in net interest income and higher non-interest expense for the current fiscal year offset the benefit of higher non-interest income and releases from the credit loss provision. “Even after a year of unprecedented loan activity in 2020, our originations in 2021 were up 20 percent,” said Chairman and CEO, Marc A. Stefanski. “In addition, the credit profile of our current customers, and those with mortgages in the pipeline, has been another source of strength during both this last quarter and our fiscal year.” Loan origination volumes remained high, as there were $3.63 billion of first mortgage loans originated during the fiscal year ended September 30, 2021 and $3.08 billion for the fiscal year ended September 30, 2020. New equity line of credit commitments were $1.65 billion and $1.23 billion, respectively, for the fiscal years ended September 30, 2021 and September 30, 2020. During the fiscal year ended September 30, 2021, $762.3 million of loans were sold for a net gain of $33.1 million compared to $844.3 million sold for a net gain of $28.4 million during the fiscal year ended September 30, 2020. By comparison, loan sales were $117.3 million for a gain of $1.9 million during the fiscal year ended September 30, 2019. Net interest income increased $0.3 million, or 0.6%, to $57.4 million for the quarter ended September 30, 2021 from $57.1 million for the quarter ended June 30, 2021. Net interest income was $50.2 million for the quarter ended September 30, 2020. Net interest income decreased by $10.7 million, or 4.4%, to $231.6 million, for the fiscal year ended September 30, 2021 from $242.3 million for the fiscal year ended September 30, 2020. The decrease between fiscal years was primarily due to lower yields on loans as many borrowers refinanced to take advantage of the lower rate environment and a decrease in the average balances of loans due to loan sales and payoffs. In addition, the increase in lower yielding cash equivalent investments was a detriment to the overall yield on assets. Funding costs declined, partially offsetting the decrease in yield, through a reduction in the average balance of borrowed funds, including maturities and prior year terminations of Federal Home Loan Bank ("FHLB") advances and their related swap contracts; the repricing of certificates of deposit, as they mature, to market rates of interest; and a heightened migration to lower-priced non-maturity deposit accounts from certificates of deposit due to historically low yield differentials. The quarter and year ended September 30, 2020 included $7.8 million of additional interest expense recognized on the terminations of advances and related swap contracts. The interest rate spread was 1.52% for both the fiscal years ended September 30, 2021 and September 30, 2020. The net interest margin was 1.66% and 1.69% for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. During the quarter ended September 30, 2021, a $2.0 million release of provision from the allowance for credit losses was recognized, bringing the total release of provision for the fiscal year to $9.0 million. A provision of $3.0 million was recorded for the prior fiscal year, with no provision during the quarter ended September 30, 2020. Releases from the allowance for credit losses during the recent fiscal year were primarily due to recoveries exceeding charge-offs and improvements in the economic trends and forecasts used to estimate credit losses for the reasonable and supportable period. On October 1, 2020, the Company adopted the Current Expected Credit Loss ("CECL") methodology and recognized a $46.2 million increase to the allowance for credit losses and a related $35.8 million reduction to retained earnings, net of tax. The allowance for credit losses was $89.3 million, or 0.71% of total loans receivable, at September 30, 2021 and included a $25.0 million liability for unfunded commitments. At September 30, 2020, the allowance for credit losses was $46.9 million, or 0.36% of total loans receivable. The Company recorded $1.5 million and $5.2 million of net loan recoveries for the quarter and fiscal year ended September 30, 2021, respectively, compared to $1.4 million and $5.0 million of net loan recoveries for the quarter and fiscal year ended September 30, 2020, respectively. Total loan delinquencies decreased $3.5 million to $24.7 million, or 0.20% of total loans receivable, at September 30, 2021 from $28.2 million, or 0.21% of total loans receivable, at September 30, 2020. Delinquencies at September 30, 2021 included a $2.1 million decrease in delinquencies on residential mortgages and a $1.3 million decrease on home equity loans and lines of credit when compared to September 30, 2020. Non-accrual loans decreased $9.4 million to $44.0 million, or 0.35% of total loans, at September 30, 2021 from $53.4 million, or 0.41% of total loans, at September 30, 2020. At September 30, 2021, there were $21.8 million, or 0.17% of total loans receivable, in COVID-19 forbearance plans compared to $165.6 million, or 1.26% of total loans receivable, at September 30, 2020. Total troubled debt restructurings decreased $14.2 million, to $127.1 million at September 30, 2021, from $141.3 million at September 30, 2020. COVID-19 forbearance plans are not generally classified as troubled debt restructurings. Non-interest income decreased $8.4 million to $8.7 million for the quarter ended September 30, 2021 from $17.1 million for the quarter ended September 30, 2020. The decrease was primarily due to a $7.2 million decrease in net gain on the sale of loans and a $1.1 million reduction in the fair value of interest rate lock commitments on mortgage loans originated for sale, both related to pricing movement in the secondary mortgage market. Non-interest income increased $2.0 million to $55.3 million for the fiscal year ended September 30, 2021 from $53.3 million for the fiscal year ended September 30, 2020, mainly due to increases in the net gain on the sale of loans and in the cash surrender value and death benefits on bank owned life insurance contracts. These increases were offset by a decrease in other non-interest income which, in the previous fiscal year, included $4.7 million of net gain on the sale of commercial property. Total non-interest expense decreased $3.2 million to $47.4 million for quarter ended September 30, 2021 from $50.6 million for the quarter ended September 30, 2020, primarily due to a $3.5 million decrease in other operating expenses. This included a $2.2 million net positive change in pension expense/benefit and no fees for termination of borrowings and swap contracts compared to $1.1 million in fees during the same quarter last year. Total non-interest expense increased $3.5 million to $195.8 million for the fiscal year ended September 30, 2021 from $192.3 million for the fiscal year ended September 30, 2020, with increases in salary and employee benefits and marketing expense being the main reason. The increase in salary and benefits was spread between associate compensation, group health insurance, stock benefit plan expense, and a one-time $1,500 after-tax bonus paid to each associate during the first quarter of fiscal year 2021 in recognition of special efforts made during the pandemic crisis. The increase in marketing expense was timing related, as some marketing efforts were delayed during the previous fiscal year, in response to COVID-19. Total assets decreased by $584.8 million, or 4.0%, to $14.06 billion at September 30, 2021 from $14.64 billion at September 30, 2020. This change was mainly due to the combination of loan sales and principal repayments on loans exceeding the total of new loan originations and the impact of adopting CECL, partially offset by an increase in bank owned life insurance contracts. The combination of loans held for investment, net of allowance and deferred loan expenses, and mortgage loans held for sale decreased $622.1 million, or 4.7%, to $12.52 billion at September 30, 2021 from $13.14 billion at September 30, 2020, reflecting the impact of prepayments and increased loan sales during the fiscal year. The residential core mortgage loan portfolio, including loans held for sale, decreased $587.6 million during the fiscal year, to $10.28 billion. At September 30, 2021, 45% of the residential mortgage loan portfolio were adjustable rate mortgages and 13% were fixed rate mortgages originated with terms of 10 years or less. The drawn balances of the home equity loans and lines of credit portfolio decreased $18.0 million, to $2.21 billion, during the fiscal year ended September 30, 2021. Total bank owned life insurance contracts increased $74.4 million, to $297.3 million at September 30, 2021, from $222.9 million at September 30, 2020, primarily due to $70 million of additional premiums placed during the current fiscal year. Deposits decreased $231.9 million, or 2.5%, to $8.99 billion at September 30, 2021 from $9.23 billion at September 30, 2020. The decrease was the result of a $567.5 million decrease in our certificates of deposit ("CDs"), partially offset by a $136.2 million increase in our checking accounts, a $157.1 million increase in our savings accounts and $43.5 million of growth in our money market deposit accounts, for the fiscal year ended September 30, 2021. Total deposits included $492.0 million and $553.9 million of brokered CDs at September 30, 2021 and September 30, 2020, respectively. Borrowed funds, all from the FHLB, decreased $429.9 million, or 12.2%, to $3.09 billion at September 30, 2021 from $3.52 billion at September 30, 2020. Included in the decrease were $525.0 million of 90 day advances that were utilized for longer term interest rate swap contracts that matured during the year and were paid off from available cash, partially offset by a $95.2 million net increase in long term advances. Total shareholders' equity increased $60.4 million, or 3.6%, to $1.73 billion at September 30, 2021 from $1.67 billion at September 30, 2020. Activity reflects $81.0 million of net income, a $64.2 million decrease in accumulated other comprehensive loss and $8.1 million of positive adjustments related to our stock compensation and employee stock ownership plans, reduced by $57.1 million of quarterly dividends and a $35.8 million provision to the allowance for credit losses, net of tax, with the adoption of CECL. The decrease in accumulated other comprehensive loss is primarily due to a net positive change in unrealized gains and losses on swap contracts. No shares of our common stock were repurchased during the fiscal year ended September 30, 2021. The Company declared and paid a quarterly dividend of $0.2825 per share during the fourth fiscal quarter of 2021 and a quarterly dividend of $0.28 per share during the first, second and third fiscal quarters of 2021. 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 receipt of its share of each dividend paid. Under current 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 13, 2021 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive the 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 13, 2022), including a total of up to $0.8475 during the three quarters ending December 31, 2021, March 31, 2022 and June 30, 2022, to be declared at the discretion of the Company's board of directors. The MHC has conducted the member vote to approve the dividend waiver each of the past eight years under Federal Reserve regulations and for each of those eight years, approximately 97% of the votes cast were in favor of the waiver. The Association operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At September 30, 2021 all of the Association's capital ratios substantially exceed the amounts required for the Association to be considered "well capitalized" for regulatory capital purposes. The Association’s Tier 1 leverage ratio was 11.15%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 20.43% and its total capital ratio was 21.00%. Additionally, the Company's Tier 1 leverage ratio was 12.65%, its Common Equity Tier 1 and Tier 1 ratios were each 23.18% and its total capital ratio was 23.75%. The current capital ratios of the Association reflect the dilutive impact of $55.0 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2020. Because of its intercompany nature, these dividends had no impact on the Company's capital ratios or its consolidated statement of condition. Presentation slides as of September 30, 2021 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning October 29, 2021. 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 80th anniversary in May, 2018. Third Federal, which lends in 25 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, seven lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of September 30, 2021, the Company’s assets totaled $14.06 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 asset 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; inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments; 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; 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, and regulatory and compliance risk; our ability to access cost-effective funding; 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 Financial Accounting Standards Board or the Public Company Accounting Oversight Board; 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, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any; 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 and the FRS and changes in the level of government support of housing finance; 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, or compensation and benefit plans 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; civic 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, 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) September 30, 2021 September 30, 2020 ASSETS Cash and due from banks $ 27,346 $ 25,270 Other interest-earning cash equivalents 460,980 472,763 Cash and cash equivalents 488,326 498,033 Investment securities available for sale (amortized cost $420,542 and $447,384, respectively) 421,783 453,438 Mortgage loans held for sale ($0 and $36,078 measured at fair value, respectively) 8,848 36,871 Loans held for investment, net: Mortgage loans 12,525,687 13,104,959 Other loans 2,778 2,581 Deferred loan expenses, net 44,859 42,459 Allowance for credit losses on loans (64,289 ) (46,937 ) Loans, net 12,509,035 13,103,062 Mortgage loan servicing rights, net 8,941 7,860 Federal Home Loan Bank stock, at cost 162,783 136,793 Real estate owned, net 289 185 Premises, equipment, and software, net 37,420 41,594 Accrued interest receivable 31,107 36,634 Bank owned life insurance contracts 297,332 222,919 Other assets 91,586 104,832 TOTAL ASSETS $ 14,057,450 $ 14,642,221 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 8,993,605 $ 9,225,554 Borrowed funds 3,091,815 3,521,745 Borrowers’ advances for insurance and taxes 109,633 111,536 Principal, interest, and related escrow owed on loans serviced 41,476 45,895 Accrued expenses and other liabilities 88,641 65,638 Total liabilities 12,325,170 12,970,368 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; 280,761,299 and 280,150,006 outstanding at September 30, 2021 and September 30, 2020, respectively 3,323 3,323 Paid-in capital 1,746,887 1,742,714 Treasury stock, at cost; 51,557,451 and 52,168,744 shares at September 30, 2021 and September 30, 2020, respectively (768,035 ) (767,649 ) Unallocated ESOP shares (35,751 ) (40,084 ) Retained earnings—substantially restricted 853,657 865,514 Accumulated other comprehensive loss (67,801 ) (131,965 ) Total shareholders’ equity 1,732,280 1,671,853 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 14,057,450 $ 14,642,221 TFS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except share and per share data) For the Three Months Ended For the Year Ended September 30, September 30, 2021 2020 2021 2020 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 92,002 $ 103,430 $ 381,887 $ 440,697 Investment securities available for sale 1,041 1,535 3,822 9,707 Other interest and dividend earning assets 1,033 797 3,642 4,894 Total interest and dividend income 94,076 105,762 389,351 455,298 INTEREST EXPENSE: Deposits 21,617 31,379 97,319 140,242 Borrowed funds 15,061 24,217 60,402 72,788 Total interest expense 36,678 55,596 157,721 213,030 NET INTEREST INCOME 57,398 50,166 231,630 242,268 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) — (9,000 ) 3,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 59,398 50,166 240,630 239,268 NON-INTEREST INCOME: Fees and service charges, net of amortization 2,156 2,363 9,602 8,798 Net gain on the sale of loans 4,305 11,536 33,082 28,443 Increase in and death benefits from bank owned life insurance contracts 2,146 1,572 9,961 7,153 Other 74 1,581 2,654 8,857 Total non-interest income 8,681 17,052 55,299 53,251 NON-INTEREST EXPENSE: Salaries and employee benefits 26,912 25,967 108,867 104,008 Marketing services 4,043 4,349 19,174 16,512 Office property, equipment and software 6,453 6,439 25,710 25,296 Federal insurance premium and assessments 2,233 2,438 9,085 10,625 State franchise tax 1,202 1,176 4,663 4,690 Other expenses 6,603 10,194 28,336 31,143 Total non-interest expense 47,446 50,563 195,835 192,274 INCOME BEFORE INCOME TAXES 20,633 16,655 100,094 100,245 INCOME TAX EXPENSE 3,618 3,077 19,087 16,928 NET INCOME $ 17,015 $ 13,578 $ 81,007 $ 83,317 Earnings per share Basic $ 0.06 $ 0.05 $ 0.29 $ 0.30 Diluted $ 0.06 $ 0.05 $ 0.29 $ 0.29 Weighted average shares outstanding Basic 276,982,904 276,069,983 276,694,594 275,859,660 Diluted 278,880,379 277,704,691 278,576,254 277,803,058 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 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 $ 570,903 $ 221 0.15 % $ 466,487 $ 118 0.10 % Mortgage-backed securities 417,320 1,041 1.00 % 484,596 1,535 1.27 % Loans (2) 12,544,760 92,002 2.93 % 13,265,564 103,430 3.12 % Federal Home Loan Bank stock 162,783 812 2.00 % 136,793 679 1.99 % Total interest-earning assets 13,695,766 94,076 2.75 % 14,353,440 105,762 2.95 % Noninterest-earning assets 533,988 580,574 Total assets $ 14,229,754 $ 14,934,014 Interest-bearing liabilities: Checking accounts $ 1,117,897 263 0.09 % $ 981,012 310 0.13 % Savings accounts 1,805,394 645 0.14 % 1,588,923 1,019 0.26 % Certificates of deposit 6,144,461 20,709 1.35 % 6,681,372 30,050 1.80 % Borrowed funds 3,146,515 15,061 1.91 % 3,657,533 24,217 2.65 % Total interest-bearing liabilities 12,214,267 36,678 1.20 % 12,908,840 55,596 1.72 % Noninterest-bearing liabilities 289,573 337,437 Total liabilities 12,503,840 13,246,277 Shareholders’ equity 1,725,914 1,687,737 Total liabilities and shareholders’ equity $ 14,229,754 $ 14,934,014 Net interest income $ 57,398 $ 50,166 Interest rate spread (1)(3) 1.55 % 1.23 % Net interest-earning assets (4) $ 1,481,499 $ 1,444,600 Net interest margin (1)(5) 1.68 % 1.40 % Average interest-earning assets to average interest-bearing liabilities 112.13 % 111.19 % Selected performance ratios: Return on average assets (1) 0.48 % 0.36 % Return on average equity (1) 3.94 % 3.22 % Average equity to average assets 12.13 % 11.30 % (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) Year Ended Year Ended September 30, 2021 September 30, 2020 Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost (Dollars in thousands) Interest-earning assets: Interest-earning cash equivalents $ 567,035 $ 673 0.12 % $ 307,902 $ 1,909 0.62 % Mortgage-backed securities 428,590 3,822 0.89 % 527,195 9,707 1.84 % Loans (1) 12,800,542 381,887 2.98 % 13,366,447 440,697 3.30 % Federal Home Loan Bank stock 155,322 2,969 1.91 % 120,011 2,985 2.49 % Total interest-earning assets 13,951,489 389,351 2.79 % 14,321,555 455,298 3.18 % Noninterest-earning assets 532,786 540,421 Total assets $ 14,484,275 $ 14,861,976 Interest-bearing liabilities: Checking accounts $ 1,079,699 1,140 0.11 % $ 917,552 1,477 0.16 % Savings accounts 1,742,042 2,992 0.17 % 1,530,977 7,775 0.51 % Certificates of deposit 6,339,412 93,187 1.47 % 6,621,289 130,990 1.98 % Borrowed funds 3,303,925 60,402 1.83 % 3,785,026 72,788 1.92 % Total interest-bearing liabilities 12,465,078 157,721 1.27 % 12,854,844 213,030 1.66 % Noninterest-bearing liabilities 321,958 298,520 Total liabilities 12,787,036 13,153,364 Shareholders’ equity 1,697,239 1,708,612 Total liabilities and shareholders’ equity $ 14,484,275 $ 14,861,976 Net interest income $ 231,630 $ 242,268 Interest rate spread (2) 1.52 % 1.52 % Net interest-earning assets (3) $ 1,486,411 $ 1,466,711 Net interest margin (4) 1.66 % 1.69 % Average interest-earning assets to average interest-bearing liabilities 111.92 % 111.41 % Selected performance ratios: Return on average assets 0.56 % 0.56 % Return on average equity 4.77 % 4.88 % Average equity to average assets 11.72 % 11.50 % (1) Loans include both mortgage loans held for sale and loans held for investment. (2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) 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/20211028006198/en/Contacts Jennifer Rosa (216) 429-5037
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 three months and fiscal year ended September 30, 2021. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211028006198/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) The Company reported net income of $17.0 million for the quarter ended September 30, 2021 compared to net income of $13.6 million for the quarter ended September 30, 2020. The improvement when compared to the prior year quarter included an increase in net interest income and lower non-interest expense, partially offset by lower net gain on the sale of loans. Net income of $81.0 million was reported for the fiscal year ended September 30, 2021 compared to net income of $83.3 million for the fiscal year ended September 30, 2020. A decline in net interest income and higher non-interest expense for the current fiscal year offset the benefit of higher non-interest income and releases from the credit loss provision. “Even after a year of unprecedented loan activity in 2020, our originations in 2021 were up 20 percent,” said Chairman and CEO, Marc A. Stefanski. “In addition, the credit profile of our current customers, and those with mortgages in the pipeline, has been another source of strength during both this last quarter and our fiscal year.” Loan origination volumes remained high, as there were $3.63 billion of first mortgage loans originated during the fiscal year ended September 30, 2021 and $3.08 billion for the fiscal year ended September 30, 2020. New equity line of credit commitments were $1.65 billion and $1.23 billion, respectively, for the fiscal years ended September 30, 2021 and September 30, 2020. During the fiscal year ended September 30, 2021, $762.3 million of loans were sold for a net gain of $33.1 million compared to $844.3 million sold for a net gain of $28.4 million during the fiscal year ended September 30, 2020. By comparison, loan sales were $117.3 million for a gain of $1.9 million during the fiscal year ended September 30, 2019. Net interest income increased $0.3 million, or 0.6%, to $57.4 million for the quarter ended September 30, 2021 from $57.1 million for the quarter ended June 30, 2021. Net interest income was $50.2 million for the quarter ended September 30, 2020. Net interest income decreased by $10.7 million, or 4.4%, to $231.6 million, for the fiscal year ended September 30, 2021 from $242.3 million for the fiscal year ended September 30, 2020. The decrease between fiscal years was primarily due to lower yields on loans as many borrowers refinanced to take advantage of the lower rate environment and a decrease in the average balances of loans due to loan sales and payoffs. In addition, the increase in lower yielding cash equivalent investments was a detriment to the overall yield on assets. Funding costs declined, partially offsetting the decrease in yield, through a reduction in the average balance of borrowed funds, including maturities and prior year terminations of Federal Home Loan Bank ("FHLB") advances and their related swap contracts; the repricing of certificates of deposit, as they mature, to market rates of interest; and a heightened migration to lower-priced non-maturity deposit accounts from certificates of deposit due to historically low yield differentials. The quarter and year ended September 30, 2020 included $7.8 million of additional interest expense recognized on the terminations of advances and related swap contracts. The interest rate spread was 1.52% for both the fiscal years ended September 30, 2021 and September 30, 2020. The net interest margin was 1.66% and 1.69% for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. During the quarter ended September 30, 2021, a $2.0 million release of provision from the allowance for credit losses was recognized, bringing the total release of provision for the fiscal year to $9.0 million. A provision of $3.0 million was recorded for the prior fiscal year, with no provision during the quarter ended September 30, 2020. Releases from the allowance for credit losses during the recent fiscal year were primarily due to recoveries exceeding charge-offs and improvements in the economic trends and forecasts used to estimate credit losses for the reasonable and supportable period. On October 1, 2020, the Company adopted the Current Expected Credit Loss ("CECL") methodology and recognized a $46.2 million increase to the allowance for credit losses and a related $35.8 million reduction to retained earnings, net of tax. The allowance for credit losses was $89.3 million, or 0.71% of total loans receivable, at September 30, 2021 and included a $25.0 million liability for unfunded commitments. At September 30, 2020, the allowance for credit losses was $46.9 million, or 0.36% of total loans receivable. The Company recorded $1.5 million and $5.2 million of net loan recoveries for the quarter and fiscal year ended September 30, 2021, respectively, compared to $1.4 million and $5.0 million of net loan recoveries for the quarter and fiscal year ended September 30, 2020, respectively. Total loan delinquencies decreased $3.5 million to $24.7 million, or 0.20% of total loans receivable, at September 30, 2021 from $28.2 million, or 0.21% of total loans receivable, at September 30, 2020. Delinquencies at September 30, 2021 included a $2.1 million decrease in delinquencies on residential mortgages and a $1.3 million decrease on home equity loans and lines of credit when compared to September 30, 2020. Non-accrual loans decreased $9.4 million to $44.0 million, or 0.35% of total loans, at September 30, 2021 from $53.4 million, or 0.41% of total loans, at September 30, 2020. At September 30, 2021, there were $21.8 million, or 0.17% of total loans receivable, in COVID-19 forbearance plans compared to $165.6 million, or 1.26% of total loans receivable, at September 30, 2020. Total troubled debt restructurings decreased $14.2 million, to $127.1 million at September 30, 2021, from $141.3 million at September 30, 2020. COVID-19 forbearance plans are not generally classified as troubled debt restructurings. Non-interest income decreased $8.4 million to $8.7 million for the quarter ended September 30, 2021 from $17.1 million for the quarter ended September 30, 2020. The decrease was primarily due to a $7.2 million decrease in net gain on the sale of loans and a $1.1 million reduction in the fair value of interest rate lock commitments on mortgage loans originated for sale, both related to pricing movement in the secondary mortgage market. Non-interest income increased $2.0 million to $55.3 million for the fiscal year ended September 30, 2021 from $53.3 million for the fiscal year ended September 30, 2020, mainly due to increases in the net gain on the sale of loans and in the cash surrender value and death benefits on bank owned life insurance contracts. These increases were offset by a decrease in other non-interest income which, in the previous fiscal year, included $4.7 million of net gain on the sale of commercial property. Total non-interest expense decreased $3.2 million to $47.4 million for quarter ended September 30, 2021 from $50.6 million for the quarter ended September 30, 2020, primarily due to a $3.5 million decrease in other operating expenses. This included a $2.2 million net positive change in pension expense/benefit and no fees for termination of borrowings and swap contracts compared to $1.1 million in fees during the same quarter last year. Total non-interest expense increased $3.5 million to $195.8 million for the fiscal year ended September 30, 2021 from $192.3 million for the fiscal year ended September 30, 2020, with increases in salary and employee benefits and marketing expense being the main reason. The increase in salary and benefits was spread between associate compensation, group health insurance, stock benefit plan expense, and a one-time $1,500 after-tax bonus paid to each associate during the first quarter of fiscal year 2021 in recognition of special efforts made during the pandemic crisis. The increase in marketing expense was timing related, as some marketing efforts were delayed during the previous fiscal year, in response to COVID-19. Total assets decreased by $584.8 million, or 4.0%, to $14.06 billion at September 30, 2021 from $14.64 billion at September 30, 2020. This change was mainly due to the combination of loan sales and principal repayments on loans exceeding the total of new loan originations and the impact of adopting CECL, partially offset by an increase in bank owned life insurance contracts. The combination of loans held for investment, net of allowance and deferred loan expenses, and mortgage loans held for sale decreased $622.1 million, or 4.7%, to $12.52 billion at September 30, 2021 from $13.14 billion at September 30, 2020, reflecting the impact of prepayments and increased loan sales during the fiscal year. The residential core mortgage loan portfolio, including loans held for sale, decreased $587.6 million during the fiscal year, to $10.28 billion. At September 30, 2021, 45% of the residential mortgage loan portfolio were adjustable rate mortgages and 13% were fixed rate mortgages originated with terms of 10 years or less. The drawn balances of the home equity loans and lines of credit portfolio decreased $18.0 million, to $2.21 billion, during the fiscal year ended September 30, 2021. Total bank owned life insurance contracts increased $74.4 million, to $297.3 million at September 30, 2021, from $222.9 million at September 30, 2020, primarily due to $70 million of additional premiums placed during the current fiscal year. Deposits decreased $231.9 million, or 2.5%, to $8.99 billion at September 30, 2021 from $9.23 billion at September 30, 2020. The decrease was the result of a $567.5 million decrease in our certificates of deposit ("CDs"), partially offset by a $136.2 million increase in our checking accounts, a $157.1 million increase in our savings accounts and $43.5 million of growth in our money market deposit accounts, for the fiscal year ended September 30, 2021. Total deposits included $492.0 million and $553.9 million of brokered CDs at September 30, 2021 and September 30, 2020, respectively. Borrowed funds, all from the FHLB, decreased $429.9 million, or 12.2%, to $3.09 billion at September 30, 2021 from $3.52 billion at September 30, 2020. Included in the decrease were $525.0 million of 90 day advances that were utilized for longer term interest rate swap contracts that matured during the year and were paid off from available cash, partially offset by a $95.2 million net increase in long term advances. Total shareholders' equity increased $60.4 million, or 3.6%, to $1.73 billion at September 30, 2021 from $1.67 billion at September 30, 2020. Activity reflects $81.0 million of net income, a $64.2 million decrease in accumulated other comprehensive loss and $8.1 million of positive adjustments related to our stock compensation and employee stock ownership plans, reduced by $57.1 million of quarterly dividends and a $35.8 million provision to the allowance for credit losses, net of tax, with the adoption of CECL. The decrease in accumulated other comprehensive loss is primarily due to a net positive change in unrealized gains and losses on swap contracts. No shares of our common stock were repurchased during the fiscal year ended September 30, 2021. The Company declared and paid a quarterly dividend of $0.2825 per share during the fourth fiscal quarter of 2021 and a quarterly dividend of $0.28 per share during the first, second and third fiscal quarters of 2021. 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 receipt of its share of each dividend paid. Under current 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 13, 2021 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive the 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 13, 2022), including a total of up to $0.8475 during the three quarters ending December 31, 2021, March 31, 2022 and June 30, 2022, to be declared at the discretion of the Company's board of directors. The MHC has conducted the member vote to approve the dividend waiver each of the past eight years under Federal Reserve regulations and for each of those eight years, approximately 97% of the votes cast were in favor of the waiver. The Association operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At September 30, 2021 all of the Association's capital ratios substantially exceed the amounts required for the Association to be considered "well capitalized" for regulatory capital purposes. The Association’s Tier 1 leverage ratio was 11.15%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 20.43% and its total capital ratio was 21.00%. Additionally, the Company's Tier 1 leverage ratio was 12.65%, its Common Equity Tier 1 and Tier 1 ratios were each 23.18% and its total capital ratio was 23.75%. The current capital ratios of the Association reflect the dilutive impact of $55.0 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2020. Because of its intercompany nature, these dividends had no impact on the Company's capital ratios or its consolidated statement of condition. Presentation slides as of September 30, 2021 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning October 29, 2021. 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 80th anniversary in May, 2018. Third Federal, which lends in 25 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, seven lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of September 30, 2021, the Company’s assets totaled $14.06 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 asset 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; inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments; 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; 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, and regulatory and compliance risk; our ability to access cost-effective funding; 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 Financial Accounting Standards Board or the Public Company Accounting Oversight Board; 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, and the possible short-term dilutive effect of potential acquisitions or de novo branches, if any; 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 and the FRS and changes in the level of government support of housing finance; 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, or compensation and benefit plans 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; civic 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, 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) September 30, 2021 September 30, 2020 ASSETS Cash and due from banks $ 27,346 $ 25,270 Other interest-earning cash equivalents 460,980 472,763 Cash and cash equivalents 488,326 498,033 Investment securities available for sale (amortized cost $420,542 and $447,384, respectively) 421,783 453,438 Mortgage loans held for sale ($0 and $36,078 measured at fair value, respectively) 8,848 36,871 Loans held for investment, net: Mortgage loans 12,525,687 13,104,959 Other loans 2,778 2,581 Deferred loan expenses, net 44,859 42,459 Allowance for credit losses on loans (64,289 ) (46,937 ) Loans, net 12,509,035 13,103,062 Mortgage loan servicing rights, net 8,941 7,860 Federal Home Loan Bank stock, at cost 162,783 136,793 Real estate owned, net 289 185 Premises, equipment, and software, net 37,420 41,594 Accrued interest receivable 31,107 36,634 Bank owned life insurance contracts 297,332 222,919 Other assets 91,586 104,832 TOTAL ASSETS $ 14,057,450 $ 14,642,221 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 8,993,605 $ 9,225,554 Borrowed funds 3,091,815 3,521,745 Borrowers’ advances for insurance and taxes 109,633 111,536 Principal, interest, and related escrow owed on loans serviced 41,476 45,895 Accrued expenses and other liabilities 88,641 65,638 Total liabilities 12,325,170 12,970,368 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; 280,761,299 and 280,150,006 outstanding at September 30, 2021 and September 30, 2020, respectively 3,323 3,323 Paid-in capital 1,746,887 1,742,714 Treasury stock, at cost; 51,557,451 and 52,168,744 shares at September 30, 2021 and September 30, 2020, respectively (768,035 ) (767,649 ) Unallocated ESOP shares (35,751 ) (40,084 ) Retained earnings—substantially restricted 853,657 865,514 Accumulated other comprehensive loss (67,801 ) (131,965 ) Total shareholders’ equity 1,732,280 1,671,853 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 14,057,450 $ 14,642,221 TFS FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except share and per share data) For the Three Months Ended For the Year Ended September 30, September 30, 2021 2020 2021 2020 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 92,002 $ 103,430 $ 381,887 $ 440,697 Investment securities available for sale 1,041 1,535 3,822 9,707 Other interest and dividend earning assets 1,033 797 3,642 4,894 Total interest and dividend income 94,076 105,762 389,351 455,298 INTEREST EXPENSE: Deposits 21,617 31,379 97,319 140,242 Borrowed funds 15,061 24,217 60,402 72,788 Total interest expense 36,678 55,596 157,721 213,030 NET INTEREST INCOME 57,398 50,166 231,630 242,268 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) — (9,000 ) 3,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 59,398 50,166 240,630 239,268 NON-INTEREST INCOME: Fees and service charges, net of amortization 2,156 2,363 9,602 8,798 Net gain on the sale of loans 4,305 11,536 33,082 28,443 Increase in and death benefits from bank owned life insurance contracts 2,146 1,572 9,961 7,153 Other 74 1,581 2,654 8,857 Total non-interest income 8,681 17,052 55,299 53,251 NON-INTEREST EXPENSE: Salaries and employee benefits 26,912 25,967 108,867 104,008 Marketing services 4,043 4,349 19,174 16,512 Office property, equipment and software 6,453 6,439 25,710 25,296 Federal insurance premium and assessments 2,233 2,438 9,085 10,625 State franchise tax 1,202 1,176 4,663 4,690 Other expenses 6,603 10,194 28,336 31,143 Total non-interest expense 47,446 50,563 195,835 192,274 INCOME BEFORE INCOME TAXES 20,633 16,655 100,094 100,245 INCOME TAX EXPENSE 3,618 3,077 19,087 16,928 NET INCOME $ 17,015 $ 13,578 $ 81,007 $ 83,317 Earnings per share Basic $ 0.06 $ 0.05 $ 0.29 $ 0.30 Diluted $ 0.06 $ 0.05 $ 0.29 $ 0.29 Weighted average shares outstanding Basic 276,982,904 276,069,983 276,694,594 275,859,660 Diluted 278,880,379 277,704,691 278,576,254 277,803,058 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 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 $ 570,903 $ 221 0.15 % $ 466,487 $ 118 0.10 % Mortgage-backed securities 417,320 1,041 1.00 % 484,596 1,535 1.27 % Loans (2) 12,544,760 92,002 2.93 % 13,265,564 103,430 3.12 % Federal Home Loan Bank stock 162,783 812 2.00 % 136,793 679 1.99 % Total interest-earning assets 13,695,766 94,076 2.75 % 14,353,440 105,762 2.95 % Noninterest-earning assets 533,988 580,574 Total assets $ 14,229,754 $ 14,934,014 Interest-bearing liabilities: Checking accounts $ 1,117,897 263 0.09 % $ 981,012 310 0.13 % Savings accounts 1,805,394 645 0.14 % 1,588,923 1,019 0.26 % Certificates of deposit 6,144,461 20,709 1.35 % 6,681,372 30,050 1.80 % Borrowed funds 3,146,515 15,061 1.91 % 3,657,533 24,217 2.65 % Total interest-bearing liabilities 12,214,267 36,678 1.20 % 12,908,840 55,596 1.72 % Noninterest-bearing liabilities 289,573 337,437 Total liabilities 12,503,840 13,246,277 Shareholders’ equity 1,725,914 1,687,737 Total liabilities and shareholders’ equity $ 14,229,754 $ 14,934,014 Net interest income $ 57,398 $ 50,166 Interest rate spread (1)(3) 1.55 % 1.23 % Net interest-earning assets (4) $ 1,481,499 $ 1,444,600 Net interest margin (1)(5) 1.68 % 1.40 % Average interest-earning assets to average interest-bearing liabilities 112.13 % 111.19 % Selected performance ratios: Return on average assets (1) 0.48 % 0.36 % Return on average equity (1) 3.94 % 3.22 % Average equity to average assets 12.13 % 11.30 % (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) Year Ended Year Ended September 30, 2021 September 30, 2020 Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost (Dollars in thousands) Interest-earning assets: Interest-earning cash equivalents $ 567,035 $ 673 0.12 % $ 307,902 $ 1,909 0.62 % Mortgage-backed securities 428,590 3,822 0.89 % 527,195 9,707 1.84 % Loans (1) 12,800,542 381,887 2.98 % 13,366,447 440,697 3.30 % Federal Home Loan Bank stock 155,322 2,969 1.91 % 120,011 2,985 2.49 % Total interest-earning assets 13,951,489 389,351 2.79 % 14,321,555 455,298 3.18 % Noninterest-earning assets 532,786 540,421 Total assets $ 14,484,275 $ 14,861,976 Interest-bearing liabilities: Checking accounts $ 1,079,699 1,140 0.11 % $ 917,552 1,477 0.16 % Savings accounts 1,742,042 2,992 0.17 % 1,530,977 7,775 0.51 % Certificates of deposit 6,339,412 93,187 1.47 % 6,621,289 130,990 1.98 % Borrowed funds 3,303,925 60,402 1.83 % 3,785,026 72,788 1.92 % Total interest-bearing liabilities 12,465,078 157,721 1.27 % 12,854,844 213,030 1.66 % Noninterest-bearing liabilities 321,958 298,520 Total liabilities 12,787,036 13,153,364 Shareholders’ equity 1,697,239 1,708,612 Total liabilities and shareholders’ equity $ 14,484,275 $ 14,861,976 Net interest income $ 231,630 $ 242,268 Interest rate spread (2) 1.52 % 1.52 % Net interest-earning assets (3) $ 1,486,411 $ 1,466,711 Net interest margin (4) 1.66 % 1.69 % Average interest-earning assets to average interest-bearing liabilities 111.92 % 111.41 % Selected performance ratios: Return on average assets 0.56 % 0.56 % Return on average equity 4.77 % 4.88 % Average equity to average assets 11.72 % 11.50 % (1) Loans include both mortgage loans held for sale and loans held for investment. (2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) 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/20211028006198/en/