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 TFS Financial Corporation Announces Third Fiscal Quarter Results By: Third Federal Savings and Loan via Business Wire July 27, 2023 at 17:01 PM EDT Mortgage Portfolio Grew Despite Economic Headwinds 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, 2023. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230727015146/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) “This year, we are celebrating our 85th year in business. Since 1938, we have seen many changes in the economy, but we are built to last, and are still seeing positives in our business,” said Chairman and CEO Marc A. Stefanski. “Our loan portfolio grew by more than $320 million this quarter, despite rising interest rates. The average credit score of our borrowers this fiscal year increased to 774, and 97 percent of our deposits are FDIC insured. Our 11 percent Tier 1 capital leverage ratio remains more than double the regulatory requirement, and we continue to find opportunities to expand our business and our product offerings.” Highlights - Third Quarter Fiscal 2023 Reported net income of $17.6 million Added $490 million of residential mortgage loans with an average yield of 5.69% Increased total deposits by $66 million Paid a $0.2825 dividend per share The Company reported net income of $17.6 million for the quarter ended June 30, 2023, an increase of $1.7 million from $15.9 million for the quarter ended March 31, 2023. Results improved quarter over quarter primarily due to a decrease in non-interest expenses. Net interest income decreased $0.5 million to $68.8 million for the quarter ended June 30, 2023 from $69.3 million for the quarter ended March 31, 2023. During the quarter, balances and yields on interest-earning assets increased, but were more than offset by an increase in the cost of funding. The interest rate spread was 1.50% for the quarter ended June 30, 2023 compared to 1.56% for the quarter ended March 31, 2023. The net interest margin was 1.75% for the quarter ended June 30, 2023 compared to 1.78% for the prior quarter. During the quarter ended June 30, 2023, there was no provision for credit losses compared to a $1.0 million release of provision for the quarter ended March 31, 2023. The total allowance for credit losses increased $1.8 million, to $102.6 million, or 0.69% of total loans receivable, primarily due to an increase in loans held for investment. There was $1.8 million in net loan recoveries during the quarter ended June 30, 2023. Total non-interest expense decreased $2.7 million to $52.9 million for the quarter ended June 30, 2023, from $55.6 million for the quarter ended March 31, 2023. The decrease consisted mainly of a $5.1 million decrease in salaries and employee benefits, partially offset by a $1.5 million increase in other expenses and $0.4 million increases in both marketing and property, equipment and software expenses. The decrease in salaries and employee benefits was primarily due to a reassessment and reduction of the accrual for discretionary incentive payments as well as a decrease in associate count due to natural attrition. The increase in other expenses related primarily to one-time public relations and event costs for the Association's 85th anniversary celebration and increases in appraisal and other loan-related expenses. Total assets increased by $333.3 million, or 2%, to $16.59 billion at June 30, 2023 from $16.26 billion at March 31, 2023. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments and an increase in investment securities available for sale, partially offset by a decrease in other assets. Investment securities available for sale increased $30.7 million, or 6%, to $513.3 million at June 30, 2023 from $482.6 million at March 31, 2023. During the quarter, $59.5 million of U.S. Treasury notes were purchased and pledged as collateral for initial margin requirements on swap contracts. This increase was partially offset by a $20.8 million decrease from principal repayments, net of purchases and premium or discount amortization, and a $7.9 million increase in unrealized losses on the investment securities portfolio. Loans held for investment, net of allowance and deferred loan expenses, increased $320.4 million, or 2%, to $14.88 billion at June 30, 2023 from $14.56 billion at March 31, 2023. Other assets decreased $49.4 million, or 31%, to $109.9 million at June 30, 2023 from $159.3 million at March 31, 2023. The decrease was primarily due to a decrease of $38.4 million in receivables for initial margin requirement on swap contracts. Additionally, there was a $13.4 million decrease in net deferred taxes, partially offset by a $2.9 million increase in interest receivable on swap contracts. Compared to March 31, 2023, deposits increased by $66.2 million to $9.07 billion at June 30, 2023, which consists of brokered deposit increases of $111.1 million and retail deposits decreases of $44.9 million, or less than 1%, to $8.40 billion. Borrowed funds increased $247.3 million to $5.45 billion at June 30, 2023 from $5.20 billion at March 31, 2023. The increase was primarily used to fund loan growth. Highlights - Fiscal Year-To-Date 2023 Reported net income of $55.7 million Added $1.3 billion of new residential mortgage loans with weighted average yield of 5.23% Grew net interest income by 11% compared to the same period in fiscal 2022 Remained well capitalized, with a Tier 1 leverage ratio of 11.18% Paid a $0.8475 dividend per share The Company reported net income of $55.7 million for the nine months ended June 30, 2023 compared to net income of $49.1 million for the nine months ended June 30, 2022. The $6.6 million increase was primarily due to an increase in net interest income and a decrease in provisions for credit losses offset by a decrease in non-interest income and an increase in non-interest expenses. Net interest income increased by $21.3 million, or 11.1%, to $213.2 million for the nine months ended June 30, 2023, compared to $191.9 million for the nine months ended June 30, 2022, driven by loan growth and a higher interest rate environment. The interest rate spread was 1.60% for the nine months ended June 30, 2023 compared to 1.71% for the nine months ended June 30, 2022. The net interest margin was 1.82% for the nine months ended June 30, 2023 compared to 1.83% for the prior year period. During the nine months ended June 30, 2023, there was a $2.0 million release of provision for credit losses compared to $1.0 million of provision expense for the nine months ended June 30, 2022. Net loan recoveries totaled $4.6 million during the nine months ended June 30, 2023 and $7.3 million during the prior year period. The total allowance for credit losses at June 30, 2023 was $102.6 million, or 0.69% of total loans receivable, compared to $99.9 million, or 0.70% of total loans receivable, at September 30, 2022 and $97.6 million, or 0.70% of total loans receivable, at June 30, 2022. The allowance for credit losses included $27.8 million, $27.0 million, and $28.1 million in liabilities for unfunded commitments at June 30, 2023, September 30, 2022 and June 30, 2022, respectively. Total loan delinquencies increased $1.6 million to $22.8 million, or 0.15% of total loans receivable, at June 30, 2023 from $21.2 million, or 0.16% of total loans, at September 30, 2022. Non-accrual loans decreased $5.1 million to $30.5 million, or 0.20% of total loans, at June 30, 2023 from $35.6 million, or 0.25% of total loans, at September 30, 2022. Total non-interest income decreased $3.1 million, or 16.0%, to $16.3 million for the nine months ended June 30, 2023 from $19.4 million for the nine months ended June 30, 2022. The decrease consisted mainly of a $1.9 million decrease in fees and service charges and a $1.6 million decrease in net gain on the sale of loans. The decrease in net gain on the sale of loans was the result of less favorable secondary market pricing and a lower volume of loans sold. The decrease in fees and service charges was primarily due to a decrease in partnership income. Total non-interest expenses increased $12.2 million, or 8.2%, to $161.6 million for the nine months ended June 30, 2023, from $149.4 million for the nine months ended June 30, 2022 and included increases of $2.0 million in salaries and employee benefits, $4.4 million in marketing costs, and $3.2 million in federal ("FDIC") insurance premiums and assessments. Additionally, there was a $1.2 million increase in pension expense, reported in other expenses, related to net actuarial gains and losses that are reassessed each year. 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. Total assets increased by $805.1 million, or 5%, to $16.59 billion at June 30, 2023 from $15.79 billion at September 30, 2022. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments, a $55.4 million increase in investment securities available for sale and an increase in cash and cash equivalents. Cash and cash equivalents increased $66.6 million, or 18%, to $436.2 million at June 30, 2023 from $369.6 million at September 30, 2022. Loans held for investment, net of allowance and deferred loan expenses, increased $626.6 million, or 4%, to $14.88 billion at June 30, 2023 from $14.26 billion at September 30, 2022. The residential mortgage loan portfolio increased $405.9 million, to $11.95 billion, and home equity loans and lines of credit increased $232.3 million, to $2.87 billion. Loan originations during the nine months ended June 30, 2023 included $1.31 billion of residential mortgage loans and $1.24 billion of equity loans and lines of credit compared to $2.91 billion of residential mortgage loans and $1.60 billion of equity loans and lines of credit originated during the nine months ended June 30, 2022. Total originations include residential mortgage loans acquired from strategic partners. The decrease in originations was primarily due to a generally increasing interest rate environment, resulting in minimal refinance activity. Mortgage loan originations included 89% purchases and 36% adjustable rate loans for the nine months ended June 30, 2023. Deposits increased $148.1 million, or 2%, to $9.07 billion at June 30, 2023 from $8.92 billion at September 30, 2022. The increase was the result of a $224.0 million increase in certificates of deposit ("CDs") and a $150.8 million increase in savings accounts, partially offset by a $70.3 million decrease in money market deposit accounts and a $158.9 million decrease in checking accounts. There were $667.8 million in brokered deposits at June 30, 2023 compared to $575.2 million at September 30, 2022. Borrowed funds increased $659.0 million, or 14%, to $5.45 billion at June 30, 2023 from $4.79 billion at September 30, 2022. The increase was primarily used to fund loan growth. The total balance of borrowed funds at June 30, 2023, all from the FHLB, included $243.1 million of overnight advances, $1.58 billion of term advances with a weighted average maturity of approximately 2.3 years, and $3.60 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.9 years. Additional borrowing capacity at the FHLB was $3.25 billion at June 30, 2023. Total shareholders' equity increased $41.8 million, or 2.3%, to $1.89 billion at June 30, 2023 from $1.84 billion at September 30, 2022. Activity reflects $55.7 million of net income and a $27.8 million net increase in accumulated other comprehensive income, reduced by $43.7 million for dividends paid and $5.0 million in repurchases of common stock. Additionally, there was $7.0 million of net positive adjustments related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income is primarily due to a net positive change in unrealized gains and losses on swap contracts. During the nine months ended June 30, 2023, a total of 361,869 shares of our common stock were repurchased at an average cost of $13.82 per share. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares remaining to be repurchased at June 30, 2023. The Company declared and paid a quarterly dividend of $0.2825 per share during each of the quarters of fiscal year 2023. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 11, 2023 member vote, the MHC has the approval to waive receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 11, 2024). 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 ten years under Federal Reserve regulations and for each of those ten years, approximately 97% of the votes cast were in favor of the waiver. The Company operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At June 30, 2023 all of the Company's capital ratios substantially exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 11.18%, its Common Equity Tier 1 and Tier 1 ratios were each 20.01% and its total capital ratio was 20.75%. Presentation slides as of June 30, 2023 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning July 28, 2023. 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 85th anniversary in May 2023. 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, four lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of June 30, 2023, the Company’s assets totaled $16.59 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; 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 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; 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, 2023 March 31, 2023 September 30, 2022 ASSETS Cash and due from banks $ 23,278 $ 28,468 $ 18,961 Other interest-earning cash equivalents 412,937 392,660 350,603 Cash and cash equivalents 436,215 421,128 369,564 Investment securities available for sale 513,303 482,576 457,908 Mortgage loans held for sale 595 4,398 9,661 Loans held for investment, net: Mortgage loans 14,897,681 14,580,410 14,276,478 Other loans 4,022 3,868 3,263 Deferred loan expenses, net 56,780 53,183 50,221 Allowance for credit losses on loans (74,803 ) (74,138 ) (72,895 ) Loans, net 14,883,680 14,563,323 14,257,067 Mortgage loan servicing rights, net 7,545 7,669 7,943 Federal Home Loan Bank stock, at cost 247,098 232,855 212,290 Real estate owned, net 1,400 1,165 1,191 Premises, equipment, and software, net 34,901 34,529 34,531 Accrued interest receivable 49,837 46,399 40,256 Bank owned life insurance contracts 310,498 308,339 304,040 Other assets 109,916 159,299 95,428 TOTAL ASSETS $ 16,594,988 $ 16,261,680 $ 15,789,879 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 9,069,069 $ 9,002,867 $ 8,921,017 Borrowed funds 5,452,228 5,204,964 4,793,221 Borrowers’ advances for insurance and taxes 74,359 102,888 117,250 Principal, interest, and related escrow owed on loans serviced 16,510 27,166 29,913 Accrued expenses and other liabilities 96,698 89,319 84,139 Total liabilities 14,708,864 14,427,204 13,945,540 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 1,753,801 1,752,508 1,751,223 Treasury stock, at cost (775,852 ) (775,852 ) (771,986 ) Unallocated ESOP shares (28,167 ) (29,250 ) (31,417 ) Retained earnings—substantially restricted 882,034 879,046 870,047 Accumulated other comprehensive income 50,985 4,701 23,149 Total shareholders’ equity 1,886,124 1,834,476 1,844,339 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 16,594,988 $ 16,261,680 $ 15,789,879 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, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 144,347 $ 136,835 $ 129,665 $ 114,871 $ 99,576 Investment securities available for sale 3,712 3,455 3,062 1,904 1,282 Other interest and dividend earning assets 8,598 7,262 6,243 4,236 1,913 Total interest and dividend income 156,657 147,552 138,970 121,011 102,771 INTEREST EXPENSE: Deposits 48,905 39,876 29,855 23,582 17,214 Borrowed funds 38,973 38,408 33,958 21,920 14,255 Total interest expense 87,878 78,284 63,813 45,502 31,469 NET INTEREST INCOME 68,779 69,268 75,157 75,509 71,302 PROVISION (RELEASE) FOR CREDIT LOSSES — (1,000 ) (1,000 ) — 4,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 68,779 70,268 76,157 75,509 67,302 NON-INTEREST INCOME: Fees and service charges, net of amortization 1,919 1,924 1,936 2,220 2,742 Net gain (loss) on the sale of loans 21 579 17 (1,113 ) (51 ) Increase in and death benefits from bank owned life insurance contracts 2,790 2,123 2,238 2,761 2,090 Other 1,113 703 966 514 896 Total non-interest income 5,843 5,329 5,157 4,382 5,677 NON-INTEREST EXPENSE: Salaries and employee benefits 25,332 30,390 28,403 27,206 28,756 Marketing services 7,023 6,671 7,713 4,256 4,830 Office property, equipment and software 7,246 6,802 6,800 6,558 6,762 Federal insurance premium and assessments 3,574 3,488 2,761 2,722 2,351 State franchise tax 1,230 1,268 1,208 1,201 1,197 Other expenses 8,472 6,955 6,309 6,799 7,860 Total non-interest expense 52,877 55,574 53,194 48,742 51,756 INCOME BEFORE INCOME TAXES 21,745 20,023 28,120 31,149 21,223 INCOME TAX EXPENSE 4,142 4,115 5,927 5,716 4,076 NET INCOME $ 17,603 $ 15,908 $ 22,193 $ 25,433 $ 17,147 Earnings per share - basic and diluted $ 0.06 $ 0.06 $ 0.08 $ 0.09 $ 0.06 Weighted average shares outstanding Basic 277,472,312 277,361,293 277,320,904 277,383,038 277,453,439 Diluted 278,590,810 278,499,145 278,462,937 278,505,233 278,555,759 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, 2023 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 410,847 $ 280,820 Investment securities available for sale 10,229 3,597 Other interest and dividend earning assets 22,103 3,905 Total interest and dividend income 443,179 288,322 INTEREST EXPENSE: Deposits 118,636 53,361 Borrowed funds 111,339 43,074 Total interest expense 229,975 96,435 NET INTEREST INCOME 213,204 191,887 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) 1,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 215,204 190,887 NON-INTEREST INCOME: Fees and service charges, net of amortization 5,779 7,714 Net gain on the sale of loans 617 2,249 Increase in and death benefits from bank owned life insurance contracts 7,151 7,223 Other 2,782 2,236 Total non-interest income 16,329 19,422 NON-INTEREST EXPENSE: Salaries and employee benefits 84,125 82,133 Marketing services 21,407 17,007 Office property, equipment and software 20,848 20,225 Federal insurance premium and assessments 9,823 6,639 State franchise tax 3,706 3,658 Other expenses 21,736 19,742 Total non-interest expense 161,645 149,404 INCOME BEFORE INCOME TAXES 69,888 60,905 INCOME TAX EXPENSE 14,184 11,773 NET INCOME $ 55,704 $ 49,132 Earnings per share - basic and diluted $ 0.20 $ 0.17 Weighted average shares outstanding Basic 277,384,689 277,366,624 Diluted 278,507,602 278,767,989 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended Three Months Ended June 30, 2023 March 31, 2023 June 30, 2022 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 $ 350,574 $ 4,481 5.11 % $ 350,437 $ 3,947 4.51 % $ 337,551 $ 709 0.84 % Investment securities 24,046 320 5.32 % 3,649 11 1.21 % 3,836 12 1.25 % Mortgage-backed securities 470,457 3,392 2.88 % 475,902 3,444 2.89 % 444,972 1,270 1.14 % Loans (2) 14,676,829 144,347 3.93 % 14,517,771 136,835 3.77 % 13,497,362 99,576 2.95 % Federal Home Loan Bank stock 235,177 4,117 7.00 % 230,496 3,315 5.75 % 170,155 1,204 2.83 % Total interest-earning assets 15,757,083 156,657 3.98 % 15,578,255 147,552 3.79 % 14,453,876 102,771 2.84 % Noninterest-earning assets 543,310 527,935 467,329 Total assets $ 16,300,393 $ 16,106,190 $ 14,921,205 Interest-bearing liabilities: Checking accounts $ 1,064,738 1,317 0.49 % $ 1,128,560 2,229 0.79 % $ 1,475,586 958 0.26 % Savings accounts 1,890,427 8,087 1.71 % 1,668,115 5,028 1.21 % 1,882,881 931 0.20 % Certificates of deposit 6,042,798 39,501 2.61 % 6,110,460 32,619 2.14 % 5,711,412 15,325 1.07 % Borrowed funds 5,175,982 38,973 3.01 % 5,112,767 38,408 3.00 % 3,774,204 14,255 1.51 % Total interest-bearing liabilities 14,173,945 87,878 2.48 % 14,019,902 78,284 2.23 % 12,844,083 31,469 0.98 % Noninterest-bearing liabilities 264,952 209,161 250,437 Total liabilities 14,438,897 14,229,063 13,094,520 Shareholders’ equity 1,861,496 1,877,127 1,826,685 Total liabilities and shareholders’ equity $ 16,300,393 $ 16,106,190 $ 14,921,205 Net interest income $ 68,779 $ 69,268 $ 71,302 Interest rate spread (1)(3) 1.50 % 1.56 % 1.86 % Net interest-earning assets (4) $ 1,583,138 $ 1,558,353 $ 1,609,793 Net interest margin (1)(5) 1.75 % 1.78 % 1.97 % Average interest-earning assets to average interest-bearing liabilities 111.17 % 111.12 % 112.53 % Selected performance ratios: Return on average assets (1) 0.43 % 0.40 % 0.46 % Return on average equity (1) 3.78 % 3.39 % 3.75 % Average equity to average assets 11.42 % 11.65 % 12.24 % (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, 2023 June 30, 2022 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 $ 351,742 $ 11,677 4.43 % $ 389,884 $ 1,060 0.36 % Investment securities 10,438 342 4.37 % 3,604 32 1.18 % Mortgage-backed securities 470,108 9,887 2.80 % 432,781 3,565 1.10 % Loans (1) 14,530,428 410,847 3.77 % 12,975,292 280,820 2.89 % Federal Home Loan Bank stock 228,318 10,426 6.09 % 165,240 2,845 2.30 % Total interest-earning assets 15,591,034 443,179 3.79 % 13,966,801 288,322 2.75 % Noninterest-earning assets 518,875 485,123 Total assets $ 16,109,909 $ 14,451,924 Interest-bearing liabilities: Checking accounts $ 1,126,064 5,956 0.71 % $ 1,306,720 1,516 0.15 % Savings accounts 1,774,965 16,822 1.26 % 1,862,449 1,973 0.14 % Certificates of deposit 6,042,061 95,858 2.12 % 5,814,710 49,872 1.14 % Borrowed funds 5,053,965 111,339 2.94 % 3,410,751 43,074 1.68 % Total interest-bearing liabilities 13,997,055 229,975 2.19 % 12,394,630 96,435 1.04 % Noninterest-bearing liabilities 243,823 267,142 Total liabilities 14,240,878 12,661,772 Shareholders’ equity 1,869,031 1,790,152 Total liabilities and shareholders’ equity $ 16,109,909 $ 14,451,924 Net interest income $ 213,204 $ 191,887 Interest rate spread (1)(2) 1.60 % 1.71 % Net interest-earning assets (3) $ 1,593,979 $ 1,572,171 Net interest margin (1)(4) 1.82 % 1.83 % Average interest-earning assets to average interest-bearing liabilities 111.39 % 112.68 % Selected performance ratios: Return on average assets (1) 0.46 % 0.45 % Return on average equity (1) 3.97 % 3.66 % Average equity to average assets 11.60 % 12.39 % (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/20230727015146/en/Contacts TFS Financial Corporation 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.
TFS Financial Corporation Announces Third Fiscal Quarter Results By: Third Federal Savings and Loan via Business Wire July 27, 2023 at 17:01 PM EDT Mortgage Portfolio Grew Despite Economic Headwinds 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, 2023. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230727015146/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) “This year, we are celebrating our 85th year in business. Since 1938, we have seen many changes in the economy, but we are built to last, and are still seeing positives in our business,” said Chairman and CEO Marc A. Stefanski. “Our loan portfolio grew by more than $320 million this quarter, despite rising interest rates. The average credit score of our borrowers this fiscal year increased to 774, and 97 percent of our deposits are FDIC insured. Our 11 percent Tier 1 capital leverage ratio remains more than double the regulatory requirement, and we continue to find opportunities to expand our business and our product offerings.” Highlights - Third Quarter Fiscal 2023 Reported net income of $17.6 million Added $490 million of residential mortgage loans with an average yield of 5.69% Increased total deposits by $66 million Paid a $0.2825 dividend per share The Company reported net income of $17.6 million for the quarter ended June 30, 2023, an increase of $1.7 million from $15.9 million for the quarter ended March 31, 2023. Results improved quarter over quarter primarily due to a decrease in non-interest expenses. Net interest income decreased $0.5 million to $68.8 million for the quarter ended June 30, 2023 from $69.3 million for the quarter ended March 31, 2023. During the quarter, balances and yields on interest-earning assets increased, but were more than offset by an increase in the cost of funding. The interest rate spread was 1.50% for the quarter ended June 30, 2023 compared to 1.56% for the quarter ended March 31, 2023. The net interest margin was 1.75% for the quarter ended June 30, 2023 compared to 1.78% for the prior quarter. During the quarter ended June 30, 2023, there was no provision for credit losses compared to a $1.0 million release of provision for the quarter ended March 31, 2023. The total allowance for credit losses increased $1.8 million, to $102.6 million, or 0.69% of total loans receivable, primarily due to an increase in loans held for investment. There was $1.8 million in net loan recoveries during the quarter ended June 30, 2023. Total non-interest expense decreased $2.7 million to $52.9 million for the quarter ended June 30, 2023, from $55.6 million for the quarter ended March 31, 2023. The decrease consisted mainly of a $5.1 million decrease in salaries and employee benefits, partially offset by a $1.5 million increase in other expenses and $0.4 million increases in both marketing and property, equipment and software expenses. The decrease in salaries and employee benefits was primarily due to a reassessment and reduction of the accrual for discretionary incentive payments as well as a decrease in associate count due to natural attrition. The increase in other expenses related primarily to one-time public relations and event costs for the Association's 85th anniversary celebration and increases in appraisal and other loan-related expenses. Total assets increased by $333.3 million, or 2%, to $16.59 billion at June 30, 2023 from $16.26 billion at March 31, 2023. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments and an increase in investment securities available for sale, partially offset by a decrease in other assets. Investment securities available for sale increased $30.7 million, or 6%, to $513.3 million at June 30, 2023 from $482.6 million at March 31, 2023. During the quarter, $59.5 million of U.S. Treasury notes were purchased and pledged as collateral for initial margin requirements on swap contracts. This increase was partially offset by a $20.8 million decrease from principal repayments, net of purchases and premium or discount amortization, and a $7.9 million increase in unrealized losses on the investment securities portfolio. Loans held for investment, net of allowance and deferred loan expenses, increased $320.4 million, or 2%, to $14.88 billion at June 30, 2023 from $14.56 billion at March 31, 2023. Other assets decreased $49.4 million, or 31%, to $109.9 million at June 30, 2023 from $159.3 million at March 31, 2023. The decrease was primarily due to a decrease of $38.4 million in receivables for initial margin requirement on swap contracts. Additionally, there was a $13.4 million decrease in net deferred taxes, partially offset by a $2.9 million increase in interest receivable on swap contracts. Compared to March 31, 2023, deposits increased by $66.2 million to $9.07 billion at June 30, 2023, which consists of brokered deposit increases of $111.1 million and retail deposits decreases of $44.9 million, or less than 1%, to $8.40 billion. Borrowed funds increased $247.3 million to $5.45 billion at June 30, 2023 from $5.20 billion at March 31, 2023. The increase was primarily used to fund loan growth. Highlights - Fiscal Year-To-Date 2023 Reported net income of $55.7 million Added $1.3 billion of new residential mortgage loans with weighted average yield of 5.23% Grew net interest income by 11% compared to the same period in fiscal 2022 Remained well capitalized, with a Tier 1 leverage ratio of 11.18% Paid a $0.8475 dividend per share The Company reported net income of $55.7 million for the nine months ended June 30, 2023 compared to net income of $49.1 million for the nine months ended June 30, 2022. The $6.6 million increase was primarily due to an increase in net interest income and a decrease in provisions for credit losses offset by a decrease in non-interest income and an increase in non-interest expenses. Net interest income increased by $21.3 million, or 11.1%, to $213.2 million for the nine months ended June 30, 2023, compared to $191.9 million for the nine months ended June 30, 2022, driven by loan growth and a higher interest rate environment. The interest rate spread was 1.60% for the nine months ended June 30, 2023 compared to 1.71% for the nine months ended June 30, 2022. The net interest margin was 1.82% for the nine months ended June 30, 2023 compared to 1.83% for the prior year period. During the nine months ended June 30, 2023, there was a $2.0 million release of provision for credit losses compared to $1.0 million of provision expense for the nine months ended June 30, 2022. Net loan recoveries totaled $4.6 million during the nine months ended June 30, 2023 and $7.3 million during the prior year period. The total allowance for credit losses at June 30, 2023 was $102.6 million, or 0.69% of total loans receivable, compared to $99.9 million, or 0.70% of total loans receivable, at September 30, 2022 and $97.6 million, or 0.70% of total loans receivable, at June 30, 2022. The allowance for credit losses included $27.8 million, $27.0 million, and $28.1 million in liabilities for unfunded commitments at June 30, 2023, September 30, 2022 and June 30, 2022, respectively. Total loan delinquencies increased $1.6 million to $22.8 million, or 0.15% of total loans receivable, at June 30, 2023 from $21.2 million, or 0.16% of total loans, at September 30, 2022. Non-accrual loans decreased $5.1 million to $30.5 million, or 0.20% of total loans, at June 30, 2023 from $35.6 million, or 0.25% of total loans, at September 30, 2022. Total non-interest income decreased $3.1 million, or 16.0%, to $16.3 million for the nine months ended June 30, 2023 from $19.4 million for the nine months ended June 30, 2022. The decrease consisted mainly of a $1.9 million decrease in fees and service charges and a $1.6 million decrease in net gain on the sale of loans. The decrease in net gain on the sale of loans was the result of less favorable secondary market pricing and a lower volume of loans sold. The decrease in fees and service charges was primarily due to a decrease in partnership income. Total non-interest expenses increased $12.2 million, or 8.2%, to $161.6 million for the nine months ended June 30, 2023, from $149.4 million for the nine months ended June 30, 2022 and included increases of $2.0 million in salaries and employee benefits, $4.4 million in marketing costs, and $3.2 million in federal ("FDIC") insurance premiums and assessments. Additionally, there was a $1.2 million increase in pension expense, reported in other expenses, related to net actuarial gains and losses that are reassessed each year. 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. Total assets increased by $805.1 million, or 5%, to $16.59 billion at June 30, 2023 from $15.79 billion at September 30, 2022. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments, a $55.4 million increase in investment securities available for sale and an increase in cash and cash equivalents. Cash and cash equivalents increased $66.6 million, or 18%, to $436.2 million at June 30, 2023 from $369.6 million at September 30, 2022. Loans held for investment, net of allowance and deferred loan expenses, increased $626.6 million, or 4%, to $14.88 billion at June 30, 2023 from $14.26 billion at September 30, 2022. The residential mortgage loan portfolio increased $405.9 million, to $11.95 billion, and home equity loans and lines of credit increased $232.3 million, to $2.87 billion. Loan originations during the nine months ended June 30, 2023 included $1.31 billion of residential mortgage loans and $1.24 billion of equity loans and lines of credit compared to $2.91 billion of residential mortgage loans and $1.60 billion of equity loans and lines of credit originated during the nine months ended June 30, 2022. Total originations include residential mortgage loans acquired from strategic partners. The decrease in originations was primarily due to a generally increasing interest rate environment, resulting in minimal refinance activity. Mortgage loan originations included 89% purchases and 36% adjustable rate loans for the nine months ended June 30, 2023. Deposits increased $148.1 million, or 2%, to $9.07 billion at June 30, 2023 from $8.92 billion at September 30, 2022. The increase was the result of a $224.0 million increase in certificates of deposit ("CDs") and a $150.8 million increase in savings accounts, partially offset by a $70.3 million decrease in money market deposit accounts and a $158.9 million decrease in checking accounts. There were $667.8 million in brokered deposits at June 30, 2023 compared to $575.2 million at September 30, 2022. Borrowed funds increased $659.0 million, or 14%, to $5.45 billion at June 30, 2023 from $4.79 billion at September 30, 2022. The increase was primarily used to fund loan growth. The total balance of borrowed funds at June 30, 2023, all from the FHLB, included $243.1 million of overnight advances, $1.58 billion of term advances with a weighted average maturity of approximately 2.3 years, and $3.60 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.9 years. Additional borrowing capacity at the FHLB was $3.25 billion at June 30, 2023. Total shareholders' equity increased $41.8 million, or 2.3%, to $1.89 billion at June 30, 2023 from $1.84 billion at September 30, 2022. Activity reflects $55.7 million of net income and a $27.8 million net increase in accumulated other comprehensive income, reduced by $43.7 million for dividends paid and $5.0 million in repurchases of common stock. Additionally, there was $7.0 million of net positive adjustments related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income is primarily due to a net positive change in unrealized gains and losses on swap contracts. During the nine months ended June 30, 2023, a total of 361,869 shares of our common stock were repurchased at an average cost of $13.82 per share. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares remaining to be repurchased at June 30, 2023. The Company declared and paid a quarterly dividend of $0.2825 per share during each of the quarters of fiscal year 2023. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 11, 2023 member vote, the MHC has the approval to waive receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 11, 2024). 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 ten years under Federal Reserve regulations and for each of those ten years, approximately 97% of the votes cast were in favor of the waiver. The Company operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At June 30, 2023 all of the Company's capital ratios substantially exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 11.18%, its Common Equity Tier 1 and Tier 1 ratios were each 20.01% and its total capital ratio was 20.75%. Presentation slides as of June 30, 2023 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning July 28, 2023. 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 85th anniversary in May 2023. 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, four lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of June 30, 2023, the Company’s assets totaled $16.59 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; 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 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; 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, 2023 March 31, 2023 September 30, 2022 ASSETS Cash and due from banks $ 23,278 $ 28,468 $ 18,961 Other interest-earning cash equivalents 412,937 392,660 350,603 Cash and cash equivalents 436,215 421,128 369,564 Investment securities available for sale 513,303 482,576 457,908 Mortgage loans held for sale 595 4,398 9,661 Loans held for investment, net: Mortgage loans 14,897,681 14,580,410 14,276,478 Other loans 4,022 3,868 3,263 Deferred loan expenses, net 56,780 53,183 50,221 Allowance for credit losses on loans (74,803 ) (74,138 ) (72,895 ) Loans, net 14,883,680 14,563,323 14,257,067 Mortgage loan servicing rights, net 7,545 7,669 7,943 Federal Home Loan Bank stock, at cost 247,098 232,855 212,290 Real estate owned, net 1,400 1,165 1,191 Premises, equipment, and software, net 34,901 34,529 34,531 Accrued interest receivable 49,837 46,399 40,256 Bank owned life insurance contracts 310,498 308,339 304,040 Other assets 109,916 159,299 95,428 TOTAL ASSETS $ 16,594,988 $ 16,261,680 $ 15,789,879 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 9,069,069 $ 9,002,867 $ 8,921,017 Borrowed funds 5,452,228 5,204,964 4,793,221 Borrowers’ advances for insurance and taxes 74,359 102,888 117,250 Principal, interest, and related escrow owed on loans serviced 16,510 27,166 29,913 Accrued expenses and other liabilities 96,698 89,319 84,139 Total liabilities 14,708,864 14,427,204 13,945,540 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 1,753,801 1,752,508 1,751,223 Treasury stock, at cost (775,852 ) (775,852 ) (771,986 ) Unallocated ESOP shares (28,167 ) (29,250 ) (31,417 ) Retained earnings—substantially restricted 882,034 879,046 870,047 Accumulated other comprehensive income 50,985 4,701 23,149 Total shareholders’ equity 1,886,124 1,834,476 1,844,339 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 16,594,988 $ 16,261,680 $ 15,789,879 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, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 144,347 $ 136,835 $ 129,665 $ 114,871 $ 99,576 Investment securities available for sale 3,712 3,455 3,062 1,904 1,282 Other interest and dividend earning assets 8,598 7,262 6,243 4,236 1,913 Total interest and dividend income 156,657 147,552 138,970 121,011 102,771 INTEREST EXPENSE: Deposits 48,905 39,876 29,855 23,582 17,214 Borrowed funds 38,973 38,408 33,958 21,920 14,255 Total interest expense 87,878 78,284 63,813 45,502 31,469 NET INTEREST INCOME 68,779 69,268 75,157 75,509 71,302 PROVISION (RELEASE) FOR CREDIT LOSSES — (1,000 ) (1,000 ) — 4,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 68,779 70,268 76,157 75,509 67,302 NON-INTEREST INCOME: Fees and service charges, net of amortization 1,919 1,924 1,936 2,220 2,742 Net gain (loss) on the sale of loans 21 579 17 (1,113 ) (51 ) Increase in and death benefits from bank owned life insurance contracts 2,790 2,123 2,238 2,761 2,090 Other 1,113 703 966 514 896 Total non-interest income 5,843 5,329 5,157 4,382 5,677 NON-INTEREST EXPENSE: Salaries and employee benefits 25,332 30,390 28,403 27,206 28,756 Marketing services 7,023 6,671 7,713 4,256 4,830 Office property, equipment and software 7,246 6,802 6,800 6,558 6,762 Federal insurance premium and assessments 3,574 3,488 2,761 2,722 2,351 State franchise tax 1,230 1,268 1,208 1,201 1,197 Other expenses 8,472 6,955 6,309 6,799 7,860 Total non-interest expense 52,877 55,574 53,194 48,742 51,756 INCOME BEFORE INCOME TAXES 21,745 20,023 28,120 31,149 21,223 INCOME TAX EXPENSE 4,142 4,115 5,927 5,716 4,076 NET INCOME $ 17,603 $ 15,908 $ 22,193 $ 25,433 $ 17,147 Earnings per share - basic and diluted $ 0.06 $ 0.06 $ 0.08 $ 0.09 $ 0.06 Weighted average shares outstanding Basic 277,472,312 277,361,293 277,320,904 277,383,038 277,453,439 Diluted 278,590,810 278,499,145 278,462,937 278,505,233 278,555,759 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, 2023 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 410,847 $ 280,820 Investment securities available for sale 10,229 3,597 Other interest and dividend earning assets 22,103 3,905 Total interest and dividend income 443,179 288,322 INTEREST EXPENSE: Deposits 118,636 53,361 Borrowed funds 111,339 43,074 Total interest expense 229,975 96,435 NET INTEREST INCOME 213,204 191,887 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) 1,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 215,204 190,887 NON-INTEREST INCOME: Fees and service charges, net of amortization 5,779 7,714 Net gain on the sale of loans 617 2,249 Increase in and death benefits from bank owned life insurance contracts 7,151 7,223 Other 2,782 2,236 Total non-interest income 16,329 19,422 NON-INTEREST EXPENSE: Salaries and employee benefits 84,125 82,133 Marketing services 21,407 17,007 Office property, equipment and software 20,848 20,225 Federal insurance premium and assessments 9,823 6,639 State franchise tax 3,706 3,658 Other expenses 21,736 19,742 Total non-interest expense 161,645 149,404 INCOME BEFORE INCOME TAXES 69,888 60,905 INCOME TAX EXPENSE 14,184 11,773 NET INCOME $ 55,704 $ 49,132 Earnings per share - basic and diluted $ 0.20 $ 0.17 Weighted average shares outstanding Basic 277,384,689 277,366,624 Diluted 278,507,602 278,767,989 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended Three Months Ended June 30, 2023 March 31, 2023 June 30, 2022 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 $ 350,574 $ 4,481 5.11 % $ 350,437 $ 3,947 4.51 % $ 337,551 $ 709 0.84 % Investment securities 24,046 320 5.32 % 3,649 11 1.21 % 3,836 12 1.25 % Mortgage-backed securities 470,457 3,392 2.88 % 475,902 3,444 2.89 % 444,972 1,270 1.14 % Loans (2) 14,676,829 144,347 3.93 % 14,517,771 136,835 3.77 % 13,497,362 99,576 2.95 % Federal Home Loan Bank stock 235,177 4,117 7.00 % 230,496 3,315 5.75 % 170,155 1,204 2.83 % Total interest-earning assets 15,757,083 156,657 3.98 % 15,578,255 147,552 3.79 % 14,453,876 102,771 2.84 % Noninterest-earning assets 543,310 527,935 467,329 Total assets $ 16,300,393 $ 16,106,190 $ 14,921,205 Interest-bearing liabilities: Checking accounts $ 1,064,738 1,317 0.49 % $ 1,128,560 2,229 0.79 % $ 1,475,586 958 0.26 % Savings accounts 1,890,427 8,087 1.71 % 1,668,115 5,028 1.21 % 1,882,881 931 0.20 % Certificates of deposit 6,042,798 39,501 2.61 % 6,110,460 32,619 2.14 % 5,711,412 15,325 1.07 % Borrowed funds 5,175,982 38,973 3.01 % 5,112,767 38,408 3.00 % 3,774,204 14,255 1.51 % Total interest-bearing liabilities 14,173,945 87,878 2.48 % 14,019,902 78,284 2.23 % 12,844,083 31,469 0.98 % Noninterest-bearing liabilities 264,952 209,161 250,437 Total liabilities 14,438,897 14,229,063 13,094,520 Shareholders’ equity 1,861,496 1,877,127 1,826,685 Total liabilities and shareholders’ equity $ 16,300,393 $ 16,106,190 $ 14,921,205 Net interest income $ 68,779 $ 69,268 $ 71,302 Interest rate spread (1)(3) 1.50 % 1.56 % 1.86 % Net interest-earning assets (4) $ 1,583,138 $ 1,558,353 $ 1,609,793 Net interest margin (1)(5) 1.75 % 1.78 % 1.97 % Average interest-earning assets to average interest-bearing liabilities 111.17 % 111.12 % 112.53 % Selected performance ratios: Return on average assets (1) 0.43 % 0.40 % 0.46 % Return on average equity (1) 3.78 % 3.39 % 3.75 % Average equity to average assets 11.42 % 11.65 % 12.24 % (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, 2023 June 30, 2022 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 $ 351,742 $ 11,677 4.43 % $ 389,884 $ 1,060 0.36 % Investment securities 10,438 342 4.37 % 3,604 32 1.18 % Mortgage-backed securities 470,108 9,887 2.80 % 432,781 3,565 1.10 % Loans (1) 14,530,428 410,847 3.77 % 12,975,292 280,820 2.89 % Federal Home Loan Bank stock 228,318 10,426 6.09 % 165,240 2,845 2.30 % Total interest-earning assets 15,591,034 443,179 3.79 % 13,966,801 288,322 2.75 % Noninterest-earning assets 518,875 485,123 Total assets $ 16,109,909 $ 14,451,924 Interest-bearing liabilities: Checking accounts $ 1,126,064 5,956 0.71 % $ 1,306,720 1,516 0.15 % Savings accounts 1,774,965 16,822 1.26 % 1,862,449 1,973 0.14 % Certificates of deposit 6,042,061 95,858 2.12 % 5,814,710 49,872 1.14 % Borrowed funds 5,053,965 111,339 2.94 % 3,410,751 43,074 1.68 % Total interest-bearing liabilities 13,997,055 229,975 2.19 % 12,394,630 96,435 1.04 % Noninterest-bearing liabilities 243,823 267,142 Total liabilities 14,240,878 12,661,772 Shareholders’ equity 1,869,031 1,790,152 Total liabilities and shareholders’ equity $ 16,109,909 $ 14,451,924 Net interest income $ 213,204 $ 191,887 Interest rate spread (1)(2) 1.60 % 1.71 % Net interest-earning assets (3) $ 1,593,979 $ 1,572,171 Net interest margin (1)(4) 1.82 % 1.83 % Average interest-earning assets to average interest-bearing liabilities 111.39 % 112.68 % Selected performance ratios: Return on average assets (1) 0.46 % 0.45 % Return on average equity (1) 3.97 % 3.66 % Average equity to average assets 11.60 % 12.39 % (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/20230727015146/en/Contacts TFS Financial Corporation 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 quarter and nine months ended June 30, 2023. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230727015146/en/Chairman and CEO Marc A. Stefanski (Photo: Business Wire) “This year, we are celebrating our 85th year in business. Since 1938, we have seen many changes in the economy, but we are built to last, and are still seeing positives in our business,” said Chairman and CEO Marc A. Stefanski. “Our loan portfolio grew by more than $320 million this quarter, despite rising interest rates. The average credit score of our borrowers this fiscal year increased to 774, and 97 percent of our deposits are FDIC insured. Our 11 percent Tier 1 capital leverage ratio remains more than double the regulatory requirement, and we continue to find opportunities to expand our business and our product offerings.” Highlights - Third Quarter Fiscal 2023 Reported net income of $17.6 million Added $490 million of residential mortgage loans with an average yield of 5.69% Increased total deposits by $66 million Paid a $0.2825 dividend per share The Company reported net income of $17.6 million for the quarter ended June 30, 2023, an increase of $1.7 million from $15.9 million for the quarter ended March 31, 2023. Results improved quarter over quarter primarily due to a decrease in non-interest expenses. Net interest income decreased $0.5 million to $68.8 million for the quarter ended June 30, 2023 from $69.3 million for the quarter ended March 31, 2023. During the quarter, balances and yields on interest-earning assets increased, but were more than offset by an increase in the cost of funding. The interest rate spread was 1.50% for the quarter ended June 30, 2023 compared to 1.56% for the quarter ended March 31, 2023. The net interest margin was 1.75% for the quarter ended June 30, 2023 compared to 1.78% for the prior quarter. During the quarter ended June 30, 2023, there was no provision for credit losses compared to a $1.0 million release of provision for the quarter ended March 31, 2023. The total allowance for credit losses increased $1.8 million, to $102.6 million, or 0.69% of total loans receivable, primarily due to an increase in loans held for investment. There was $1.8 million in net loan recoveries during the quarter ended June 30, 2023. Total non-interest expense decreased $2.7 million to $52.9 million for the quarter ended June 30, 2023, from $55.6 million for the quarter ended March 31, 2023. The decrease consisted mainly of a $5.1 million decrease in salaries and employee benefits, partially offset by a $1.5 million increase in other expenses and $0.4 million increases in both marketing and property, equipment and software expenses. The decrease in salaries and employee benefits was primarily due to a reassessment and reduction of the accrual for discretionary incentive payments as well as a decrease in associate count due to natural attrition. The increase in other expenses related primarily to one-time public relations and event costs for the Association's 85th anniversary celebration and increases in appraisal and other loan-related expenses. Total assets increased by $333.3 million, or 2%, to $16.59 billion at June 30, 2023 from $16.26 billion at March 31, 2023. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments and an increase in investment securities available for sale, partially offset by a decrease in other assets. Investment securities available for sale increased $30.7 million, or 6%, to $513.3 million at June 30, 2023 from $482.6 million at March 31, 2023. During the quarter, $59.5 million of U.S. Treasury notes were purchased and pledged as collateral for initial margin requirements on swap contracts. This increase was partially offset by a $20.8 million decrease from principal repayments, net of purchases and premium or discount amortization, and a $7.9 million increase in unrealized losses on the investment securities portfolio. Loans held for investment, net of allowance and deferred loan expenses, increased $320.4 million, or 2%, to $14.88 billion at June 30, 2023 from $14.56 billion at March 31, 2023. Other assets decreased $49.4 million, or 31%, to $109.9 million at June 30, 2023 from $159.3 million at March 31, 2023. The decrease was primarily due to a decrease of $38.4 million in receivables for initial margin requirement on swap contracts. Additionally, there was a $13.4 million decrease in net deferred taxes, partially offset by a $2.9 million increase in interest receivable on swap contracts. Compared to March 31, 2023, deposits increased by $66.2 million to $9.07 billion at June 30, 2023, which consists of brokered deposit increases of $111.1 million and retail deposits decreases of $44.9 million, or less than 1%, to $8.40 billion. Borrowed funds increased $247.3 million to $5.45 billion at June 30, 2023 from $5.20 billion at March 31, 2023. The increase was primarily used to fund loan growth. Highlights - Fiscal Year-To-Date 2023 Reported net income of $55.7 million Added $1.3 billion of new residential mortgage loans with weighted average yield of 5.23% Grew net interest income by 11% compared to the same period in fiscal 2022 Remained well capitalized, with a Tier 1 leverage ratio of 11.18% Paid a $0.8475 dividend per share The Company reported net income of $55.7 million for the nine months ended June 30, 2023 compared to net income of $49.1 million for the nine months ended June 30, 2022. The $6.6 million increase was primarily due to an increase in net interest income and a decrease in provisions for credit losses offset by a decrease in non-interest income and an increase in non-interest expenses. Net interest income increased by $21.3 million, or 11.1%, to $213.2 million for the nine months ended June 30, 2023, compared to $191.9 million for the nine months ended June 30, 2022, driven by loan growth and a higher interest rate environment. The interest rate spread was 1.60% for the nine months ended June 30, 2023 compared to 1.71% for the nine months ended June 30, 2022. The net interest margin was 1.82% for the nine months ended June 30, 2023 compared to 1.83% for the prior year period. During the nine months ended June 30, 2023, there was a $2.0 million release of provision for credit losses compared to $1.0 million of provision expense for the nine months ended June 30, 2022. Net loan recoveries totaled $4.6 million during the nine months ended June 30, 2023 and $7.3 million during the prior year period. The total allowance for credit losses at June 30, 2023 was $102.6 million, or 0.69% of total loans receivable, compared to $99.9 million, or 0.70% of total loans receivable, at September 30, 2022 and $97.6 million, or 0.70% of total loans receivable, at June 30, 2022. The allowance for credit losses included $27.8 million, $27.0 million, and $28.1 million in liabilities for unfunded commitments at June 30, 2023, September 30, 2022 and June 30, 2022, respectively. Total loan delinquencies increased $1.6 million to $22.8 million, or 0.15% of total loans receivable, at June 30, 2023 from $21.2 million, or 0.16% of total loans, at September 30, 2022. Non-accrual loans decreased $5.1 million to $30.5 million, or 0.20% of total loans, at June 30, 2023 from $35.6 million, or 0.25% of total loans, at September 30, 2022. Total non-interest income decreased $3.1 million, or 16.0%, to $16.3 million for the nine months ended June 30, 2023 from $19.4 million for the nine months ended June 30, 2022. The decrease consisted mainly of a $1.9 million decrease in fees and service charges and a $1.6 million decrease in net gain on the sale of loans. The decrease in net gain on the sale of loans was the result of less favorable secondary market pricing and a lower volume of loans sold. The decrease in fees and service charges was primarily due to a decrease in partnership income. Total non-interest expenses increased $12.2 million, or 8.2%, to $161.6 million for the nine months ended June 30, 2023, from $149.4 million for the nine months ended June 30, 2022 and included increases of $2.0 million in salaries and employee benefits, $4.4 million in marketing costs, and $3.2 million in federal ("FDIC") insurance premiums and assessments. Additionally, there was a $1.2 million increase in pension expense, reported in other expenses, related to net actuarial gains and losses that are reassessed each year. 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. Total assets increased by $805.1 million, or 5%, to $16.59 billion at June 30, 2023 from $15.79 billion at September 30, 2022. The increase was mainly the result of new loan originations exceeding the total of loan sales and principal repayments, a $55.4 million increase in investment securities available for sale and an increase in cash and cash equivalents. Cash and cash equivalents increased $66.6 million, or 18%, to $436.2 million at June 30, 2023 from $369.6 million at September 30, 2022. Loans held for investment, net of allowance and deferred loan expenses, increased $626.6 million, or 4%, to $14.88 billion at June 30, 2023 from $14.26 billion at September 30, 2022. The residential mortgage loan portfolio increased $405.9 million, to $11.95 billion, and home equity loans and lines of credit increased $232.3 million, to $2.87 billion. Loan originations during the nine months ended June 30, 2023 included $1.31 billion of residential mortgage loans and $1.24 billion of equity loans and lines of credit compared to $2.91 billion of residential mortgage loans and $1.60 billion of equity loans and lines of credit originated during the nine months ended June 30, 2022. Total originations include residential mortgage loans acquired from strategic partners. The decrease in originations was primarily due to a generally increasing interest rate environment, resulting in minimal refinance activity. Mortgage loan originations included 89% purchases and 36% adjustable rate loans for the nine months ended June 30, 2023. Deposits increased $148.1 million, or 2%, to $9.07 billion at June 30, 2023 from $8.92 billion at September 30, 2022. The increase was the result of a $224.0 million increase in certificates of deposit ("CDs") and a $150.8 million increase in savings accounts, partially offset by a $70.3 million decrease in money market deposit accounts and a $158.9 million decrease in checking accounts. There were $667.8 million in brokered deposits at June 30, 2023 compared to $575.2 million at September 30, 2022. Borrowed funds increased $659.0 million, or 14%, to $5.45 billion at June 30, 2023 from $4.79 billion at September 30, 2022. The increase was primarily used to fund loan growth. The total balance of borrowed funds at June 30, 2023, all from the FHLB, included $243.1 million of overnight advances, $1.58 billion of term advances with a weighted average maturity of approximately 2.3 years, and $3.60 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 3.9 years. Additional borrowing capacity at the FHLB was $3.25 billion at June 30, 2023. Total shareholders' equity increased $41.8 million, or 2.3%, to $1.89 billion at June 30, 2023 from $1.84 billion at September 30, 2022. Activity reflects $55.7 million of net income and a $27.8 million net increase in accumulated other comprehensive income, reduced by $43.7 million for dividends paid and $5.0 million in repurchases of common stock. Additionally, there was $7.0 million of net positive adjustments related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income is primarily due to a net positive change in unrealized gains and losses on swap contracts. During the nine months ended June 30, 2023, a total of 361,869 shares of our common stock were repurchased at an average cost of $13.82 per share. The Company's eighth stock repurchase program allows for a total of 10,000,000 shares to be repurchased, with 5,191,951 shares remaining to be repurchased at June 30, 2023. The Company declared and paid a quarterly dividend of $0.2825 per share during each of the quarters of fiscal year 2023. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 11, 2023 member vote, the MHC has the approval to waive receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 11, 2024). 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 ten years under Federal Reserve regulations and for each of those ten years, approximately 97% of the votes cast were in favor of the waiver. The Company operates under the capital requirements for the standardized approach of the Basel III capital framework for U.S. banking organizations (“Basel III Rules”). At June 30, 2023 all of the Company's capital ratios substantially exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 11.18%, its Common Equity Tier 1 and Tier 1 ratios were each 20.01% and its total capital ratio was 20.75%. Presentation slides as of June 30, 2023 will be available on the Company's website, www.thirdfederal.com, under the Investor Relations link within the "Recent Presentations" menu, beginning July 28, 2023. 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 85th anniversary in May 2023. 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, four lending offices in Central and Southern Ohio, and 16 full service branches throughout Florida. As of June 30, 2023, the Company’s assets totaled $16.59 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; 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 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; 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, 2023 March 31, 2023 September 30, 2022 ASSETS Cash and due from banks $ 23,278 $ 28,468 $ 18,961 Other interest-earning cash equivalents 412,937 392,660 350,603 Cash and cash equivalents 436,215 421,128 369,564 Investment securities available for sale 513,303 482,576 457,908 Mortgage loans held for sale 595 4,398 9,661 Loans held for investment, net: Mortgage loans 14,897,681 14,580,410 14,276,478 Other loans 4,022 3,868 3,263 Deferred loan expenses, net 56,780 53,183 50,221 Allowance for credit losses on loans (74,803 ) (74,138 ) (72,895 ) Loans, net 14,883,680 14,563,323 14,257,067 Mortgage loan servicing rights, net 7,545 7,669 7,943 Federal Home Loan Bank stock, at cost 247,098 232,855 212,290 Real estate owned, net 1,400 1,165 1,191 Premises, equipment, and software, net 34,901 34,529 34,531 Accrued interest receivable 49,837 46,399 40,256 Bank owned life insurance contracts 310,498 308,339 304,040 Other assets 109,916 159,299 95,428 TOTAL ASSETS $ 16,594,988 $ 16,261,680 $ 15,789,879 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits $ 9,069,069 $ 9,002,867 $ 8,921,017 Borrowed funds 5,452,228 5,204,964 4,793,221 Borrowers’ advances for insurance and taxes 74,359 102,888 117,250 Principal, interest, and related escrow owed on loans serviced 16,510 27,166 29,913 Accrued expenses and other liabilities 96,698 89,319 84,139 Total liabilities 14,708,864 14,427,204 13,945,540 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 1,753,801 1,752,508 1,751,223 Treasury stock, at cost (775,852 ) (775,852 ) (771,986 ) Unallocated ESOP shares (28,167 ) (29,250 ) (31,417 ) Retained earnings—substantially restricted 882,034 879,046 870,047 Accumulated other comprehensive income 50,985 4,701 23,149 Total shareholders’ equity 1,886,124 1,834,476 1,844,339 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 16,594,988 $ 16,261,680 $ 15,789,879 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, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 144,347 $ 136,835 $ 129,665 $ 114,871 $ 99,576 Investment securities available for sale 3,712 3,455 3,062 1,904 1,282 Other interest and dividend earning assets 8,598 7,262 6,243 4,236 1,913 Total interest and dividend income 156,657 147,552 138,970 121,011 102,771 INTEREST EXPENSE: Deposits 48,905 39,876 29,855 23,582 17,214 Borrowed funds 38,973 38,408 33,958 21,920 14,255 Total interest expense 87,878 78,284 63,813 45,502 31,469 NET INTEREST INCOME 68,779 69,268 75,157 75,509 71,302 PROVISION (RELEASE) FOR CREDIT LOSSES — (1,000 ) (1,000 ) — 4,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 68,779 70,268 76,157 75,509 67,302 NON-INTEREST INCOME: Fees and service charges, net of amortization 1,919 1,924 1,936 2,220 2,742 Net gain (loss) on the sale of loans 21 579 17 (1,113 ) (51 ) Increase in and death benefits from bank owned life insurance contracts 2,790 2,123 2,238 2,761 2,090 Other 1,113 703 966 514 896 Total non-interest income 5,843 5,329 5,157 4,382 5,677 NON-INTEREST EXPENSE: Salaries and employee benefits 25,332 30,390 28,403 27,206 28,756 Marketing services 7,023 6,671 7,713 4,256 4,830 Office property, equipment and software 7,246 6,802 6,800 6,558 6,762 Federal insurance premium and assessments 3,574 3,488 2,761 2,722 2,351 State franchise tax 1,230 1,268 1,208 1,201 1,197 Other expenses 8,472 6,955 6,309 6,799 7,860 Total non-interest expense 52,877 55,574 53,194 48,742 51,756 INCOME BEFORE INCOME TAXES 21,745 20,023 28,120 31,149 21,223 INCOME TAX EXPENSE 4,142 4,115 5,927 5,716 4,076 NET INCOME $ 17,603 $ 15,908 $ 22,193 $ 25,433 $ 17,147 Earnings per share - basic and diluted $ 0.06 $ 0.06 $ 0.08 $ 0.09 $ 0.06 Weighted average shares outstanding Basic 277,472,312 277,361,293 277,320,904 277,383,038 277,453,439 Diluted 278,590,810 278,499,145 278,462,937 278,505,233 278,555,759 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, 2023 2022 INTEREST AND DIVIDEND INCOME: Loans, including fees $ 410,847 $ 280,820 Investment securities available for sale 10,229 3,597 Other interest and dividend earning assets 22,103 3,905 Total interest and dividend income 443,179 288,322 INTEREST EXPENSE: Deposits 118,636 53,361 Borrowed funds 111,339 43,074 Total interest expense 229,975 96,435 NET INTEREST INCOME 213,204 191,887 PROVISION (RELEASE) FOR CREDIT LOSSES (2,000 ) 1,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 215,204 190,887 NON-INTEREST INCOME: Fees and service charges, net of amortization 5,779 7,714 Net gain on the sale of loans 617 2,249 Increase in and death benefits from bank owned life insurance contracts 7,151 7,223 Other 2,782 2,236 Total non-interest income 16,329 19,422 NON-INTEREST EXPENSE: Salaries and employee benefits 84,125 82,133 Marketing services 21,407 17,007 Office property, equipment and software 20,848 20,225 Federal insurance premium and assessments 9,823 6,639 State franchise tax 3,706 3,658 Other expenses 21,736 19,742 Total non-interest expense 161,645 149,404 INCOME BEFORE INCOME TAXES 69,888 60,905 INCOME TAX EXPENSE 14,184 11,773 NET INCOME $ 55,704 $ 49,132 Earnings per share - basic and diluted $ 0.20 $ 0.17 Weighted average shares outstanding Basic 277,384,689 277,366,624 Diluted 278,507,602 278,767,989 TFS FINANCIAL CORPORATION AND SUBSIDIARIES AVERAGE BALANCES AND YIELDS (unaudited) Three Months Ended Three Months Ended Three Months Ended June 30, 2023 March 31, 2023 June 30, 2022 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 $ 350,574 $ 4,481 5.11 % $ 350,437 $ 3,947 4.51 % $ 337,551 $ 709 0.84 % Investment securities 24,046 320 5.32 % 3,649 11 1.21 % 3,836 12 1.25 % Mortgage-backed securities 470,457 3,392 2.88 % 475,902 3,444 2.89 % 444,972 1,270 1.14 % Loans (2) 14,676,829 144,347 3.93 % 14,517,771 136,835 3.77 % 13,497,362 99,576 2.95 % Federal Home Loan Bank stock 235,177 4,117 7.00 % 230,496 3,315 5.75 % 170,155 1,204 2.83 % Total interest-earning assets 15,757,083 156,657 3.98 % 15,578,255 147,552 3.79 % 14,453,876 102,771 2.84 % Noninterest-earning assets 543,310 527,935 467,329 Total assets $ 16,300,393 $ 16,106,190 $ 14,921,205 Interest-bearing liabilities: Checking accounts $ 1,064,738 1,317 0.49 % $ 1,128,560 2,229 0.79 % $ 1,475,586 958 0.26 % Savings accounts 1,890,427 8,087 1.71 % 1,668,115 5,028 1.21 % 1,882,881 931 0.20 % Certificates of deposit 6,042,798 39,501 2.61 % 6,110,460 32,619 2.14 % 5,711,412 15,325 1.07 % Borrowed funds 5,175,982 38,973 3.01 % 5,112,767 38,408 3.00 % 3,774,204 14,255 1.51 % Total interest-bearing liabilities 14,173,945 87,878 2.48 % 14,019,902 78,284 2.23 % 12,844,083 31,469 0.98 % Noninterest-bearing liabilities 264,952 209,161 250,437 Total liabilities 14,438,897 14,229,063 13,094,520 Shareholders’ equity 1,861,496 1,877,127 1,826,685 Total liabilities and shareholders’ equity $ 16,300,393 $ 16,106,190 $ 14,921,205 Net interest income $ 68,779 $ 69,268 $ 71,302 Interest rate spread (1)(3) 1.50 % 1.56 % 1.86 % Net interest-earning assets (4) $ 1,583,138 $ 1,558,353 $ 1,609,793 Net interest margin (1)(5) 1.75 % 1.78 % 1.97 % Average interest-earning assets to average interest-bearing liabilities 111.17 % 111.12 % 112.53 % Selected performance ratios: Return on average assets (1) 0.43 % 0.40 % 0.46 % Return on average equity (1) 3.78 % 3.39 % 3.75 % Average equity to average assets 11.42 % 11.65 % 12.24 % (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, 2023 June 30, 2022 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 $ 351,742 $ 11,677 4.43 % $ 389,884 $ 1,060 0.36 % Investment securities 10,438 342 4.37 % 3,604 32 1.18 % Mortgage-backed securities 470,108 9,887 2.80 % 432,781 3,565 1.10 % Loans (1) 14,530,428 410,847 3.77 % 12,975,292 280,820 2.89 % Federal Home Loan Bank stock 228,318 10,426 6.09 % 165,240 2,845 2.30 % Total interest-earning assets 15,591,034 443,179 3.79 % 13,966,801 288,322 2.75 % Noninterest-earning assets 518,875 485,123 Total assets $ 16,109,909 $ 14,451,924 Interest-bearing liabilities: Checking accounts $ 1,126,064 5,956 0.71 % $ 1,306,720 1,516 0.15 % Savings accounts 1,774,965 16,822 1.26 % 1,862,449 1,973 0.14 % Certificates of deposit 6,042,061 95,858 2.12 % 5,814,710 49,872 1.14 % Borrowed funds 5,053,965 111,339 2.94 % 3,410,751 43,074 1.68 % Total interest-bearing liabilities 13,997,055 229,975 2.19 % 12,394,630 96,435 1.04 % Noninterest-bearing liabilities 243,823 267,142 Total liabilities 14,240,878 12,661,772 Shareholders’ equity 1,869,031 1,790,152 Total liabilities and shareholders’ equity $ 16,109,909 $ 14,451,924 Net interest income $ 213,204 $ 191,887 Interest rate spread (1)(2) 1.60 % 1.71 % Net interest-earning assets (3) $ 1,593,979 $ 1,572,171 Net interest margin (1)(4) 1.82 % 1.83 % Average interest-earning assets to average interest-bearing liabilities 111.39 % 112.68 % Selected performance ratios: Return on average assets (1) 0.46 % 0.45 % Return on average equity (1) 3.97 % 3.66 % Average equity to average assets 11.60 % 12.39 % (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/20230727015146/en/