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 FASB or the PCAOB;

●

the adoption of implementing regulations by a number of different regulatory bodies, and uncertainty in the exact nature, extent and timing of such regulations and the impact they will have on us;

●

our ability to enter new markets successfully and take advantage of growth opportunities;

●

our ability to retain key employees;

●

future adverse developments concerning Fannie Mae or Freddie Mac;

●

changes in monetary and fiscal policy of the U.S. Government, including policies of the U.S. Treasury, the Federal Reserve System, Fannie Mae, the OCC, FDIC, and others;

●

the continuing governmental efforts to restructure the U.S. financial and regulatory system;

●

the ability of the U.S. Government to remain open, function properly and manage federal debt limits;

●

changes in policy and/or assessment rates of taxing authorities that adversely affect us or our customers;

●

changes in accounting and tax estimates;

●

changes in our organization and changes in expense trends, including but not limited to trends affecting non-performing assets, charge-offs and provisions for credit losses;

●

the inability of third-party providers to perform their obligations to us;

●

our ability to retain key employees;

●

civil unrest;

●

cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data or disable our systems; and

●

the impact of wide-spread pandemic, including COVID-19, and related government action, on our business and the economy.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except share data)

December 31,
2023

September 30,
2023

ASSETS

Cash and due from banks

$

45,858

$

29,134

Other interest-earning cash equivalents

505,910

437,612

Cash and cash equivalents

551,768

466,746

Investment securities available for sale

525,175

508,324

Mortgage loans held for sale

1,095

3,260

Loans held for investment, net:

Mortgage loans

15,210,653

15,177,844

Other loans

4,811

4,411

Deferred loan expenses, net

60,862

60,807

Allowance for credit losses on loans

(69,084

)

(77,315

)

Loans, net

15,207,242

15,165,747

Mortgage loan servicing rights, net

7,634

7,400

Federal Home Loan Bank stock, at cost

254,700

247,098

Real estate owned, net

1,070

1,444

Premises, equipment, and software, net

34,209

34,708

Accrued interest receivable

55,614

53,910

Bank owned life insurance contracts

311,848

312,072

Other assets

103,436

117,270

TOTAL ASSETS

$

17,053,791

$

16,917,979

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits

$

9,921,056

$

9,449,820

Borrowed funds

5,030,561

5,273,637

Borrowers’ advances for insurance and taxes

109,093

124,417

Principal, interest, and related escrow owed on loans serviced

29,204

29,811

Accrued expenses and other liabilities

97,150

112,933

Total liabilities

15,187,064

14,990,618

Commitments and contingent liabilities

Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding

—

—

Common stock, $0.01 par value, 700,000,000 shares authorized; 332,318,750 shares issued

3,323

3,323

Paid-in capital

1,750,440

1,755,027

Treasury stock, at cost

(772,195

)

(776,101

)

Unallocated ESOP shares

(26,000

)

(27,084

)

Retained earnings—substantially restricted

900,973

886,984

Accumulated other comprehensive income

10,186

85,212

Total shareholders’ equity

1,866,727

1,927,361

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

17,053,791

$

16,917,979

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(In thousands, except share and per share data)

For the three months ended

December 31,
2023

September 30,
2023

June 30,
2023

March 31,
2023

December 31,
2022

INTEREST AND DIVIDEND INCOME:

Loans, including fees

$

162,035

$

154,763

$

144,347

$

136,835

$

129,665

Investment securities available for sale

4,395

4,141

3,712

3,455

3,062

Other interest and dividend earning assets

10,729

9,836

8,598

7,262

6,243

Total interest and dividend income

177,159

168,740

156,657

147,552

138,970

INTEREST EXPENSE:

Deposits

64,326

55,565

48,905

39,876

29,855

Borrowed funds

43,741

42,812

38,973

38,408

33,958

Total interest expense

108,067

98,377

87,878

78,284

63,813

NET INTEREST INCOME

69,092

70,363

68,779

69,268

75,157

PROVISION (RELEASE) FOR CREDIT LOSSES

(1,000

)

500

—

(1,000

)

(1,000

)

NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES

70,092

69,863

68,779

70,268

76,157

NON-INTEREST INCOME:

Fees and service charges, net of amortization

1,748

2,061

1,919

1,924

1,936

Net gain (loss) on the sale of loans

481

(119

)

21

579

17

Increase in and death benefits from bank owned life insurance contracts

3,191

2,204

2,790

2,123

2,238

Other

895

954

1,113

703

966

Total non-interest income

6,315

5,100

5,843

5,329

5,157

NON-INTEREST EXPENSE:

Salaries and employee benefits

27,116

28,660

25,332

30,390

28,403

Marketing services

4,431

3,881

7,023

6,671

7,713

Office property, equipment and software

6,845

6,886

7,246

6,802

6,800

Federal insurance premium and assessments

3,778

3,629

3,574

3,488

2,761

State franchise tax

1,176

1,185

1,230

1,268

1,208

Other expenses

6,931

7,243

8,472

6,955

6,309

Total non-interest expense

50,277

51,484

52,877

55,574

53,194

INCOME BEFORE INCOME TAXES

26,130

23,479

21,745

20,023

28,120

INCOME TAX EXPENSE

5,423

3,933

4,142

4,115

5,927

NET INCOME

$

20,707

$

19,546

$

17,603

$

15,908

$

22,193

Earnings per share - basic and diluted

$

0.07

$

0.07

$

0.06

$

0.06

$

0.08

Weighted average shares outstanding

Basic

277,841,526

277,589,775

277,472,312

277,361,293

277,320,904

Diluted

279,001,898

278,826,441

278,590,810

278,499,145

278,462,937

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS (unaudited)

Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2023

September 30, 2023

December 31, 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

$

398,506

$

5,124

5.14

%

$

370,577

$

5,149

5.56

%

$

354,214

$

3,249

3.67

%

Investment securities

64,778

850

5.25

%

63,231

781

4.94

%

3,618

11

1.22

%

Mortgage-backed securities

444,411

3,545

3.19

%

449,351

3,360

2.99

%

463,964

3,051

2.63

%

Loans (2)

15,232,349

162,035

4.26

%

15,037,776

154,763

4.12

%

14,396,685

129,665

3.60

%

Federal Home Loan Bank stock

270,540

5,605

8.29

%

247,098

4,687

7.59

%

219,282

2,994

5.46

%

Total interest-earning assets

16,410,584

177,159

4.32

%

16,168,033

168,740

4.17

%

15,437,763

138,970

3.60

%

Noninterest-earning assets

553,461

503,865

485,380

Total assets

$

16,964,045

$

16,671,898

$

15,923,143

Interest-bearing liabilities:

Checking accounts

$

937,817

118

0.05

%

$

993,952

125

0.05

%

$

1,184,896

2,410

0.81

%

Savings accounts

1,721,466

6,912

1.61

%

1,869,756

7,864

1.68

%

1,766,354

3,707

0.84

%

Certificates of deposit

6,847,482

57,296

3.35

%

6,369,734

47,576

2.99

%

5,972,924

23,738

1.59

%

Borrowed funds

5,228,239

43,741

3.35

%

5,294,285

42,812

3.23

%

4,873,145

33,958

2.79

%

Total interest-bearing liabilities

14,735,004

108,067

2.93

%

14,527,727

98,377

2.71

%

13,797,319

63,813

1.85

%

Noninterest-bearing liabilities

278,801

226,083

257,353

Total liabilities

15,013,805

14,753,810

14,054,672

Shareholders’ equity

1,950,240

1,918,088

1,868,471

Total liabilities and shareholders’ equity

$

16,964,045

$

16,671,898

$

15,923,143

Net interest income

$

69,092

$

70,363

$

75,157

Interest rate spread (1)(3)

1.39

%

1.46

%

1.75

%

Net interest-earning assets (4)

$

1,675,580

$

1,640,306

$

1,640,444

Net interest margin (1)(5)

1.68

%

1.74

%

1.95

%

Average interest-earning assets to average interest-bearing liabilities

111.37

%

111.29

%

111.89

%

Selected performance ratios:

Return on average assets (1)

0.49

%

0.47

%

0.56

%

Return on average equity (1)

4.25

%

4.08

%

4.75

%

Average equity to average assets

11.50

%

11.50

%

11.73

%

(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.