SEC Form 10-Q filed by TFS Financial Corporation

5/9/24 3:25:13 PM ET

Savings Institutions

Finance

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tfsl-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________

FORM 10-Q

________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-33390

________________________________________

TFS FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

________________________________________


United States of America		52-2054948
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7007 Broadway Avenue
Cleveland,	Ohio	44105
(Address of Principal Executive Offices)		(Zip Code)

(216) 441-6000

Registrant’s telephone number, including area code:

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

________________________________________

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange in which registered

Common Stock, par value $0.01 per share

TFSL

The NASDAQ Stock Market, LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 7, 2024, there were 280,710,854 shares of the Registrant’s common stock, par value $0.01 per share, outstanding, of which 227,119,132 shares, or 80.9% of the Registrant’s common stock, were held by Third Federal Savings and Loan Association of Cleveland, MHC, the Registrant’s mutual holding company.

TFS Financial Corporation

INDEX


		Page

	Glossary of Terms	3

PART l – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Statements of Condition
	March 31, 2024 and September 30, 2023	4

	Consolidated Statements of Income
	Three and Six Months Ended March 31, 2024 and 2023	5

	Consolidated Statements of Comprehensive Income
	Three and Six Months Ended March 31, 2024 and 2023	6

	Consolidated Statements of Shareholders’ Equity
	Three and Six Months Ended March 31, 2024 and 2023	7

	Consolidated Statements of Cash Flows
	Six Months Ended March 31, 2024 and 2023	9

	Notes to Unaudited Interim Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63

Item 4.	Controls and Procedures	66

Part II — OTHER INFORMATION

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67

Item 3.	Defaults Upon Senior Securities	67

Item 4.	Mine Safety Disclosures	67

Item 5.	Other Information	68

Item 6.	Exhibits	68

SIGNATURES		69


ACL: Allowance for Credit Losses			FICO: Fair Isaac Corporation
ACT: Tax Cuts and Jobs Act			FRB-Cleveland: Federal Reserve Bank of Cleveland
AOCI: Accumulated Other Comprehensive Income			Freddie Mac: Federal Home Loan Mortgage Corporation
ARM: Adjustable Rate Mortgage			FRS: Board of Governors of the Federal Reserve System
ASC: Accounting Standards Codification			GAAP: Generally Accepted Accounting Principles
ASU: Accounting Standards Update			Ginnie Mae: Government National Mortgage Association
Association: Third Federal Savings and Loan			GVA: General Valuation Allowances
Association of Cleveland			HPI: Home Price Index
BOLI: Bank Owned Life Insurance			IRR: Interest Rate Risk
BTFP: Bank Term Funding Program			IRS: Internal Revenue Service
CDs: Certificates of Deposit			IVA: Individual Valuation Allowance
CECL: Current Expected Credit Losses			LIBOR: London Interbank Offer Rate
CET1: Common Equity Tier 1			LIHTC: Low Income Housing Tax Credit
CFPB: Consumer Financial Protection Bureau			LIP: Loans-in-Process
CLTV: Combined Loan-to-Value			LTV: Loan-to-Value
Company: TFS Financial Corporation and its			MMK: Money Market Account
subsidiaries			OCC: Office of the Comptroller of the Currency
DFA: Dodd-Frank Wall Street Reform and Consumer			OCI: Other Comprehensive Income
Protection Act			OTS: Office of Thrift Supervision
DIF: Deposit Insurance Fund			PCAOB: Public Company Accounting Oversight Board
EaR: Earnings at Risk			PMI: Private Mortgage Insurance
EPS: Earnings per Share			PMIC: PMI Mortgage Insurance Co.
ESOP: Third Federal Employee (Associate) Stock			QTL: Qualified Thrift Lender
Ownership Plan			REMICs: Real Estate Mortgage Investment Conduits
EVE: Economic Value of Equity			REO: Real Estate Owned
Fannie Mae: Federal National Mortgage Association			SEC: United States Securities and Exchange Commission
FASB: Financial Accounting Standards Board			SOFR: Secured Overnight Financing Rate
FDIC: Federal Deposit Insurance Corporation			TDR: Troubled Debt Restructuring
FHFA: Federal Housing Finance Agency			Third Federal Savings, MHC: Third Federal Savings
FHLB: Federal Home Loan Bank			and Loan Association of Cleveland, MHC


	March 31, 2024		September 30, 2023
ASSETS
Cash and due from banks	$	27,381	$	29,134
Other interest-earning cash equivalents	566,953		437,612
Cash and cash equivalents	594,334		466,746
Investment securities available for sale (amortized cost $561,806 and $561,715, respectively)	520,172		508,324


Mortgage loans held for sale ($9,698 and $3,260 measured at fair value, respectively)	9,698		3,260
Loans held for investment, net:
Mortgage loans	15,152,032		15,177,844
Other loans	4,709		4,411
Deferred loan expenses, net	61,047		60,807
Allowance for credit losses on loans	(68,169)		(77,315)
Loans, net	15,149,619		15,165,747
Mortgage loan servicing rights, net	7,547		7,400
Federal Home Loan Bank stock, at cost	240,365		247,098
Real estate owned, net	230		1,444
Premises, equipment, and software, net	33,885		34,708
Accrued interest receivable	56,887		53,910
Bank owned life insurance contracts	313,458		312,072
Other assets	90,955		117,270
TOTAL ASSETS	$	17,017,150	$	16,917,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	9,935,631	$	9,449,820
Borrowed funds	4,955,438		5,273,637
Borrowers’ advances for insurance and taxes	99,492		124,417
Principal, interest, and related escrow owed on loans serviced	25,946		29,811
Accrued expenses and other liabilities	93,146		112,933
Total liabilities	15,109,653		14,990,618
Commitments and contingent liabilities
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par value, 700,000,000 shares authorized; 332,318,750 shares issued; 280,710,854 and 280,359,173 outstanding at March 31, 2024 and September 30, 2023, respectively	3,323		3,323
Paid-in capital	1,751,960		1,755,027
Treasury stock, at cost; 51,607,896 and 51,959,577 shares at March 31, 2024 and September 30, 2023, respectively	(772,195)		(776,101)
Unallocated ESOP shares	(24,917)		(27,084)
Retained earnings—substantially restricted	906,908		886,984
Accumulated other comprehensive income	42,418		85,212
Total shareholders’ equity	1,907,497		1,927,361
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	17,017,150	$	16,917,979


	For the Three Months Ended				For the Six Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	162,970	$	136,835	$	325,005	$	266,500
Investment securities available for sale	4,476		3,455		8,871		6,517

Other interest and dividend earning assets	16,047		7,262		26,776		13,505
Total interest and dividend income	183,493		147,552		360,652		286,522
INTEREST EXPENSE:
Deposits	72,685		39,876		137,011		69,731
Borrowed funds	39,430		38,408		83,171		72,366
Total interest expense	112,115		78,284		220,182		142,097
NET INTEREST INCOME	71,378		69,268		140,470		144,425
PROVISION (RELEASE) FOR CREDIT LOSSES	(1,000)		(1,000)		(2,000)		(2,000)
NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES	72,378		70,268		142,470		146,425
NON-INTEREST INCOME:
Fees and service charges, net of amortization	1,845		1,924		3,593		3,860
Net gain on the sale of loans	442		579		923		596
Increase in and death benefits from bank owned life insurance contracts	2,193		2,123		5,384		4,361

Other	1,242		703		2,137		1,669
Total non-interest income	5,722		5,329		12,037		10,486
NON-INTEREST EXPENSE:
Salaries and employee benefits	27,501		30,390		54,617		58,793
Marketing services	5,099		6,671		9,530		14,384
Office property, equipment and software	7,303		6,802		14,148		13,602
Federal insurance premium and assessments	4,013		3,488		7,791		6,249
State franchise tax	1,238		1,268		2,414		2,476
Other expenses	7,044		6,955		13,975		13,264
Total non-interest expense	52,198		55,574		102,475		108,768
INCOME BEFORE INCOME TAXES	25,902		20,023		52,032		48,143
INCOME TAX EXPENSE	5,189		4,115		10,612		10,042
NET INCOME	$	20,713	$	15,908	$	41,420	$	38,101
Earnings per share—basic and diluted	$	0.07	$	0.06	$	0.15	$	0.13
Weighted average shares outstanding
Basic	278,183,041		277,361,293		278,011,351		277,340,877
Diluted	279,046,837		278,499,145		279,019,468		278,472,705


	For the Three Months Ended March 31, 2023
	Common stock		Paid-in capital		Treasury stock		Unallocated common stock held by ESOP		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2022	$	3,323	$	1,751,020	$	(775,154)	$	(30,334)	$	877,713	$	23,021	$	1,849,589
Net income	—		—		—		—		15,908		—		15,908
Other comprehensive income (loss), net of tax	—		—		—		—		—		(18,320)		(18,320)
ESOP shares allocated or committed to be released	—		435		—		1,084		—		—		1,519
Compensation costs for equity incentive plans	—		1,068		—		—		—		—		1,068
Purchase of treasury stock (46,869 shares)	—		—		(684)		—		—		—		(684)
Treasury stock allocated to equity incentive plan	—		(15)		(14)		—		—		—		(29)
Dividends declared to common shareholders ($0.2825 per common share)	—		—		—		—		(14,575)		—		(14,575)
Balance at March 31, 2023	$	3,323	$	1,752,508	$	(775,852)	$	(29,250)	$	879,046	$	4,701	$	1,834,476


	For the Three Months Ended March 31, 2024
	Common stock		Paid-in capital		Treasury stock		Unallocated common stock held by ESOP		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2023	$	3,323	$	1,750,440	$	(772,195)	$	(26,000)	$	900,973	$	10,186	$	1,866,727

Net income	—		—		—		—		20,713		—		20,713
Other comprehensive income, net of tax	—		—		—		—		—		32,232		32,232
ESOP shares allocated or committed to be released	—		349		—		1,083		—		—		1,432
Compensation costs for equity incentive plans	—		1,171		—		—		—		—		1,171

Dividends declared to common shareholders ($0.2825 per common share)	—		—		—		—		(14,778)		—		(14,778)
Balance at March 31, 2024	$	3,323	$	1,751,960	$	(772,195)	$	(24,917)	$	906,908	$	42,418	$	1,907,497


	For the Six Months Ended March 31, 2023
	Common stock		Paid-in capital		Treasury stock		Unallocated common stock held by ESOP		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at September 30, 2022	$	3,323	$	1,751,223	$	(771,986)	$	(31,417)	$	870,047	$	23,149	$	1,844,339

Net income	—		—		—		—		38,101		—		38,101
Other comprehensive income (loss), net of tax	—		—		—		—		—		(18,448)		(18,448)
ESOP shares allocated or committed to be released	—		832		—		2,167		—		—		2,999
Compensation costs for equity incentive plans	—		2,219		—		—		—		—		2,219
Purchase of treasury stock (361,869 shares)	—		—		(5,000)		—		—		—		(5,000)
Treasury stock allocated to equity incentive plan	—		(1,766)		1,134		—		—		—		(632)
Dividends declared to common shareholders ($0.5650 per common share)	—		—		—		—		(29,102)		—		(29,102)
Balance at March 31, 2023	$	3,323	$	1,752,508	$	(775,852)	$	(29,250)	$	879,046	$	4,701	$	1,834,476


	For the Six Months Ended March 31, 2024
	Common stock		Paid-in capital		Treasury stock		Unallocated common stock held by ESOP		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at September 30, 2023	$	3,323	$	1,755,027	$	(776,101)	$	(27,084)	$	886,984	$	85,212	$	1,927,361
Cumulative effect from changes in accounting principle, net of tax1	—		—		—		—		7,898		—		7,898
Net income	—		—		—		—		41,420		—		41,420
Other comprehensive income (loss), net of tax	—		—		—		—		—		(42,794)		(42,794)
ESOP shares allocated or committed to be released	—		671		—		2,167		—		—		2,838
Compensation costs for equity incentive plans	—		2,086		—		—		—		—		2,086

Treasury stock allocated to equity incentive plan	—		(5,824)		3,906		—		—		—		(1,918)
Dividends declared to common shareholders ($0.5650 per common share)	—		—		—		—		(29,394)		—		(29,394)
Balance at March 31, 2024	$	3,323	$	1,751,960	$	(772,195)	$	(24,917)	$	906,908	$	42,418	$	1,907,497
1Related to ASU 2022-02 adopted October 1, 2023.


	For the Six Months Ended March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	41,420	$	38,101
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense	4,924		5,218
Depreciation and amortization	9,096		8,736
Deferred income taxes	(118)		(155)
Provision (release) for credit losses	(2,000)		(2,000)
Net gain on the sale of loans	(923)		(596)
Other net (gains) losses	230		(242)
Proceeds from sales of loans held for sale	17,326		16,854
Loans originated and principal repayments on loans for sale	(22,791)		(19,598)
Increase in bank owned life insurance contracts	(5,384)		(4,361)
Net decrease (increase) in interest receivable and other assets	2,614		(18,108)
Net increase in accrued expenses and other liabilities	6,143		19,277

Net cash provided by operating activities	50,537		43,126
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated	(1,351,348)		(1,552,032)
Principal repayments on loans	1,271,878		1,233,000
Proceeds from sales, principal repayments and maturities of:
Securities available for sale	96,689		40,961

Proceeds from sale of:
Loans	100,151		17,551
Real estate owned	983		253
FHLB stock	41,248		—

Purchases of:

FHLB stock	(34,515)		(20,565)
Securities available for sale	(96,733)		(63,722)
Premises and equipment	(1,515)		(2,463)
Other	3,295		88
Net cash provided by (used in) investing activities	30,133		(346,929)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	475,297		78,161
Net decrease in borrowers' advances for insurance and taxes	(24,925)		(14,362)
Net decrease in principal and interest owed on loans serviced	(3,865)		(2,747)
Net increase in short-term borrowed funds	(642,000)		275,000
Net increase (decrease) in Fed Funds purchased	—		(225,000)
Proceeds from long-term borrowed funds	575,000		350,000
Repayment of long-term borrowed funds	(251,328)		(1,739)
Cash collateral/settlements received from (provided to) derivative counterparties	(49,844)		(69,135)
Acquisition of treasury shares	(1,918)		(5,632)
Dividends paid to common shareholders	(29,499)		(29,179)
Net cash provided by financing activities	46,918		355,367
NET INCREASE IN CASH AND CASH EQUIVALENTS	127,588		51,564
CASH AND CASH EQUIVALENTS—Beginning of period	466,746		369,564
CASH AND CASH EQUIVALENTS—End of period	$	594,334	$	421,128
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest on deposits	$	134,833	$	66,428
Cash paid for interest on borrowed funds	120,489		78,058
Cash paid (received) for interest on interest rate swaps	(45,595)		(14,237)
Cash paid for income taxes	10,635		12,310
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to real estate owned	—		295
Transfer of loans from held for investment to held for sale	100,594		17,466
Transfer of loans from held for sale to held for investment	—		8,433
Treasury stock issued for stock benefit plans	5,824		1,765


	For the Three Months Ended March 31,
	2024					2023
	Income		Shares	Per share amount		Income		Shares	Per share amount
	(Dollars in thousands, except per share data)
Net income	$	20,713				$	15,908
Less: income allocated to restricted stock units	342					385
Basic earnings per share:
Income available to common shareholders	20,371		278,183,041	$	0.07	15,523		277,361,293	$	0.06
Diluted earnings per share:
Effect of dilutive potential common shares			863,796					1,137,852
Income available to common shareholders	$	20,371	279,046,837	$	0.07	$	15,523	278,499,145	$	0.06


	March 31, 2024
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
REMICs	$	487,452	$	189	$	(41,491)	$	446,150
Fannie Mae certificates	860		15		(6)		869
Freddie Mac certificates	1,139		—		(49)		1,090
U.S. government and agency obligations	72,355		15		(307)		72,063
Total	$	561,806	$	219	$	(41,853)	$	520,172


	September 30, 2023
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
REMICs	$	495,874	$	—	$	(52,867)	$	443,007
Fannie Mae certificates	834		1		(21)		814
Freddie Mac certificates	1,141		—		(97)		1,044
U.S. government and agency obligations	63,866		—		(407)		63,459
Total	$	561,715	$	1	$	(53,392)	$	508,324


	March 31, 2024						September 30, 2023
	Amortized Cost		Fair Value		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
Due in one year or less	$	68,556	$	68,569	5.25	%	$	59,948	$	59,936	5.13	%
Due after one to five years	9,988		9,545		1.92		10,529		9,929		2.00
Due after five to ten years	30,197		28,917		2.99		31,372		29,381		2.42
Ten years or greater	453,065		413,141		3.03		459,866		409,078		2.82
Total	$	561,806	$	520,172	3.28	%	$	561,715	$	508,324	3.03	%


	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
March 31, 2024
Real estate loans:
Residential Core	$	5,691	$	2,343	$	8,808	$	16,842	$	11,777,582	$	11,794,424
Residential Home Today	905		223		914		2,042		41,137		43,179
Home equity loans and lines of credit	3,676		1,278		4,520		9,474		3,348,238		3,357,712
Construction	—		—		—		—		17,764		17,764
Total real estate loans	10,272		3,844		14,242		28,358		15,184,721		15,213,079
Other loans	—		—		—		—		4,709		4,709
Total	$	10,272	$	3,844	$	14,242	$	28,358	$	15,189,430	$	15,217,788


	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total
September 30, 2023
Real estate loans:
Residential Core	$	3,680	$	1,763	$	8,268	$	13,711	$	12,089,228	$	12,102,939
Residential Home Today	666		323		855		1,844		44,186		46,030
Home equity loans and lines of credit	3,271		690		3,876		7,837		3,059,444		3,067,281
Construction	—		—		—		—		22,401		22,401
Total real estate loans	7,617		2,776		12,999		23,392		15,215,259		15,238,651
Other loans	—		—		—		—		4,411		4,411
Total	$	7,617	$	2,776	$	12,999	$	23,392	$	15,219,670	$	15,243,062


	March 31, 2024				September 30, 2023
	Non-accrual with No ACL		Total Non-accrual		Non-accrual with No ACL		Total Non-accrual
Real estate loans:
Residential Core	$	18,793	$	22,545	$	15,691	$	19,414
Residential Home Today	3,851		4,141		4,511		4,623
Home equity loans and lines of credit	7,728		8,567		7,035		7,877

Total non-accrual loans	$	30,372	$	35,253	$	27,237	$	31,914


	For the Three Months Ended March 31, 2024
	Beginning Balance		Provisions (Releases)		Charge-offs		Recoveries		Ending Balance
Real estate loans:
Residential Core	$	49,389	$	(1,851)	$	(37)	$	213	$	47,714
Residential Home Today	(2,814)		(303)		—		493		(2,624)
Home equity loans and lines of credit	22,436		(20)		(204)		786		22,998
Construction	73		8		—		—		81
Total real estate loans	$	69,084	$	(2,166)	$	(241)	$	1,492	$	68,169
Total Unfunded Loan Commitments (1)	$	25,491	$	1,166	$	—	$	—	$	26,657
Total Allowance for Credit Losses	$	94,575	$	(1,000)	$	(241)	$	1,492	$	94,826


	March 31, 2024
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Available for sale—
REMICs	$	64,786	$	430	$	362,410	$	41,061	$	427,196	$	41,491
Fannie Mae certificates	—		—		104		6		104		6
Freddie Mac certificates	—		—		1,090		49		1,090		49
U.S. government and agency obligations	—		—		3,728		307		3,728		307
Total	$	64,786	$	430	$	367,332	$	41,423	$	432,118	$	41,853


	For the Six Months Ended March 31, 2024
	Beginning Balance		Adoption of ASU 2022-02		Provisions (Releases)		Charge-offs		Recoveries		Ending Balance
Real estate loans:
Residential Core	$	55,375	$	(5,896)	$	(2,152)	$	(187)	$	574	$	47,714
Residential Home Today	(1,236)		(1,896)		(441)		(30)		979		(2,624)
Home equity loans and lines of credit	23,047		(2,470)		1,499		(534)		1,456		22,998
Construction	129		—		(48)		—		—		81
Total real estate loans	$	77,315	$	(10,262)	$	(1,142)	$	(751)	$	3,009	$	68,169
Total Unfunded Loan Commitments (1)	$	27,515	$	—	$	(858)	$	—	$	—	$	26,657
Total Allowance for Credit Losses	$	104,830	$	(10,262)	$	(2,000)	$	(751)	$	3,009	$	94,826


													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term
	By fiscal year of origination
	2024		2023		2022		2021		2020		Prior						Total
March 31, 2024
Real estate loans:
Residential Core
Pass	$	307,541	$	1,544,893	$	3,076,717	$	1,962,444	$	1,282,367	$	3,591,444	$	—	$	—	$	11,765,406
Special Mention	—		—		—		—		—		990		—		—		990
Substandard	193		1,377		2,850		958		1,896		20,754		—		—		28,028
Total Residential Core	307,734		1,546,270		3,079,567		1,963,402		1,284,263		3,613,188		—		—		11,794,424
Residential Home Today (1)
Pass	—		—		—		—		—		38,128		—		—		38,128

Substandard	—		—		—		—		—		5,051		—		—		5,051
Total Residential Home Today	—		—		—		—		—		43,179		—		—		43,179
Home equity loans and lines of credit
Pass	126,735		184,305		65,083		21,450		5,948		17,238		2,865,900		55,797		3,342,456
Special Mention	—		—		161		—		—		51		3,704		374		4,290
Substandard	—		177		212		161		48		175		5,525		4,668		10,966
Total Home equity loans and lines of credit	126,735		184,482		65,456		21,611		5,996		17,464		2,875,129		60,839		3,357,712



Total Construction	4,552		12,194		1,018		—		—		—		—		—		17,764
Total real estate loans
Pass	438,828		1,741,392		3,142,818		1,983,894		1,288,315		3,646,810		2,865,900		55,797		15,163,754
Special Mention	—		—		161		—		—		1,041		3,704		374		5,280
Substandard	193		1,554		3,062		1,119		1,944		25,980		5,525		4,668		44,045
Total real estate loans	$	439,021	$	1,742,946	$	3,146,041	$	1,985,013	$	1,290,259	$	3,673,831	$	2,875,129	$	60,839	$	15,213,079


	For the Three Months Ended March 31, 2024
	Interest Rate Reduction		Term Extension		Significant Payment Delay		Combination-Rate Reduction & Term Extension		Other		Total		% of Total Class
Residential Core	$	—	$	235	$	2,271	$	704	$	477	$	3,687	0.03	%
Residential Home Today	—		—		171		56		—		227		0.53
Home equity loans and lines of credit	—		18		343		47		25		433		0.01

Total	$	—	$	253	$	2,785	$	807	$	502	$	4,347	0.03	%


September 30, 2023	Initial Restructuring		Multiple Restructurings		Bankruptcy		Total
Residential Core	$	28,546	$	15,730	$	9,577	$	53,853
Residential Home Today	9,390		10,114		1,691		21,195
Home equity loans and lines of credit	21,063		2,460		879		24,402

Total	$	58,999	$	28,304	$	12,147	$	99,450


	For the Three Months Ended March 31, 2023
TDRs That Subsequently Defaulted	Number of Contracts	Amortized Cost
Residential Core	2	$	214
Residential Home Today	3	73
Home equity loans and lines of credit	1	58
Total	6	$	345


	March 31, 2024		September 30, 2023
Checking accounts	$	891,085	$	983,396
Savings accounts, excluding money market accounts	1,266,388		1,460,601
Money market accounts	239,886		346,479
Certificates of deposit	7,517,395		6,648,982
	9,914,754		9,439,458
Accrued interest	20,877		10,362
Total deposits	$	9,935,631	$	9,449,820


	Borrowing Capacity		Borrowings Available		Borrowings Outstanding
FHLB	$	6,817,151	$	1,884,619	$	4,932,532
FRB Cleveland	693,155		693,155		—
Fed Funds Purchased	575,000		575,000		—
Subtotal	$	8,085,306	$	3,152,774	4,932,532
Accrued Interest					22,906
Total Borrowings					$	4,955,438


	Amount		Weighted Average Rate
Maturing in:
12 months or less	$	900,000	2.15	%
13 to 24 months	875,000		2.74
25 to 36 months	975,445		3.14
37 to 48 months	801,880		3.73
49 to 60 months	376,273		3.54
Over 60 months	1,003,934		3.41
Total Advances	4,932,532		3.07	%
Accrued interest	22,906
Total	$	4,955,438


	Amounts Reclassified from Accumulated Other Comprehensive Income				Amounts Reclassified from Accumulated Other Comprehensive Income
Details about Accumulated Other Comprehensive Income Components	For the Three Months Ended March 31,				For the Six Months Ended March 31,				Line Item in the Consolidated Statements of Income
	2024		2023		2024		2023
Cash flow hedges:
Interest (income) expense	$	(23,435)	$	(12,551)	$	(45,783)	$	(19,175)	Interest expense
Net income tax effect	5,366		2,855		10,483		4,340		Income tax expense
Net of income tax expense	(18,069)		(9,696)		(35,300)		(14,835)

Amortization of defined benefit plan:
Actuarial loss	137		255		274		510		(a)
Net income tax effect	(33)		(60)		(64)		(118)		Income tax expense
Net of income tax expense	104		195		210		392


Total reclassifications for the period	$	(17,965)	$	(9,501)	$	(35,090)	$	(14,443)

SEC Form 10-Q filed by TFS Financial Corporation

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Financials


	Commitment		Allowance
Fixed-rate mortgage loans	$	56,175	$	291
Adjustable-rate mortgage loans	13,382		68
Home equity loans and lines of credit	208,168		2,745
Total	$	277,725	$	3,104


	Commitment		Allowance
Home equity lines of credit	$	4,913,653	$	23,470
Construction loans	15,040		83
Total	$	4,928,693	$	23,553


			Recurring Fair Value Measurements at Reporting Date Using
	March 31, 2024		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available for sale:
REMICs	$	446,150	$	—	$	446,150	$	—
Fannie Mae certificates	869		—		869		—
Freddie Mac securities	1,090		—		1,090		—
U.S. government and agency obligations	72,063		—		72,063		—
Mortgage loans held for sale	6,038		—		6,038		—
Derivatives:
Interest rate lock commitments	358		—		—		358

Total	$	526,568	$	—	$	526,210	$	358
Liabilities
Derivatives:

Forward commitments for the sale of mortgage loans	140		—		140		—

Total	$	140	$	—	$	140	$	—


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Beginning balance	$	55	$	(29)	$	(1)	$	(333)
Gain during the period due to changes in fair value:
Included in other non-interest income	303		6		359		310
Ending balance	$	358	$	(23)	$	358	$	(23)
Change in unrealized gains for the period included in earnings for assets held at end of the reporting date	$	358	$	(23)	$	358	$	(23)


			Nonrecurring Fair Value Measurements at Reporting Date Using
	March 31, 2024		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Collateral-dependent loans, net of allowance	$	39,109	$	—	$	—	$	39,109
Mortgage loans held for sale	3,661		—		3,661		—
Real estate owned(1)	250		—		—		250
Total	$	43,020	$	—	$	3,661	$	39,359


	Fair Value
	March 31, 2024	Valuation Technique(s)	Unobservable Input	Range			Weighted Average
Collateral-dependent loans, net of allowance	$39,109	Market comparables of collateral discounted to estimated net proceeds	Discount appraised value to estimated net proceeds based on historical experience:
			• Residential Properties	0	-	28%	4.6%

Interest rate lock commitments	$358	Quoted Secondary Market pricing	Closure rate	0	-	100%	91.7%


	March 31, 2024
	Carrying		Fair		Level 1		Level 2		Level 3
	Amount		Value
Assets:
Cash and due from banks	$	27,381	$	27,381	$	27,381	$	—	$	—
Interest-earning cash equivalents	566,953		566,953		566,953		—		—
Investment securities available for sale	520,172		520,172		—		520,172		—
Mortgage loans held for sale	9,698		9,698		—		9,698		—
Loans, net:
Mortgage loans held for investment	15,144,910		13,819,240		—		—		13,819,240
Other loans	4,709		4,709		—		—		4,709
Federal Home Loan Bank stock	240,365		240,365		N/A		—		—
Accrued interest receivable	56,887		56,887		—		56,887		—

Cash collateral received from or held by counterparty	6,656		6,656		6,656		—		—
Derivatives	358		358		—		—		358
Liabilities:
Checking and passbook accounts	$	2,397,359	$	2,397,359	$	—	$	2,397,359	$	—
Certificates of deposit	7,538,272		7,434,048		—		7,434,048		—
Borrowed funds	4,955,438		4,959,926		—		4,959,926		—
Borrowers’ advances for insurance and taxes	99,492		99,492		—		99,492		—
Principal, interest and escrow owed on loans serviced	25,946		25,946		—		25,946		—
Derivatives	140		140		—		140		—


	March 31, 2024
					Weighted Average
	Notional Value		Fair Value		Term (years)	Fixed-Rate Payments
Derivatives designated as hedging instruments
Cash flow hedges: Interest rate swaps
Other Assets	$	3,690,000	$	—	3.3	2.94	%
Other Liabilities	135,000		—		3.1	4.44
Total cash flow hedges: Interest rate swaps	$	3,825,000	$	—	3.3	2.99	%


		Three Months Ended				Six Months Ended
	Location of Gain or (Loss)	March 31,				March 31,
	Recognized in Income	2024		2023		2024		2023
Cash flow hedges
Amount of gain/(loss) recognized	Other comprehensive income	$	68,462	$	(16,814)	$	(22,291)	$	(7,710)
Amount of gain/(loss) reclassified from AOCI	Interest expense: Borrowed funds and Deposits	23,435		12,551		45,783		19,175


Derivatives not designated as hedging instruments
Interest rate lock commitments	Other non-interest income	$	303	$	6	$	359	$	310
Forward commitments for the sale of mortgage loans	Net gain/(loss) on the sale of loans	(25)		(76)		(151)		(76)


Forward Looking Statements
This report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include, among other things:
●			statements of our goals, intentions and expectations;
●			statements regarding our business plans and prospects and growth and operating strategies;
●			statements concerning trends in our provision for credit losses and charge-offs on loans and off-balance sheet exposures;
●			statements regarding the trends in factors affecting our financial condition and results of operations, including credit quality of our loan and investment portfolios; and
●			estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:
●			significantly increased competition among depository and other financial institutions, including with respect to our ability to charge overdraft fees;
●			inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments, or our ability to originate loans;
●			general economic conditions, either globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected;
●			the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of our loans and other assets, and changes in estimates of the allowance for credit losses;
●			decreased demand for our products and services and lower revenue and earnings because of a recession or other events;
●			changes in consumer spending, borrowing and savings habits, including repayment speeds on loans;
●			adverse changes and volatility in the securities markets, credit markets or real estate markets;
●			our ability to manage market risk, credit risk, liquidity risk, reputational risk, regulatory risk and compliance risk;
●			our ability to access cost-effective funding;
●			legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends;
●			changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or the PCAOB;
●			the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us;
●			our ability to enter new markets successfully and take advantage of growth opportunities;
●			the continuing governmental efforts to restructure the U.S. financial and regulatory system;
●			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 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;
●			changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio;
●			the inability of third-party providers to perform their obligations to us;
●			our ability to retain key employees;
●			the effects of global or national war, conflict or acts of terrorism;