CLEVELAND--(BUSINESS WIRE)--Jul 30, 2026--
TFS Financial Corporation (NASDAQ: TFSL) (the "Company", "we", "our"), 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, 2026.
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“I’m proud to share that Third Federal had record earnings of $30.5 million in the third quarter,” said Chairman and CEO Marc A. Stefanski. “First mortgage originations were more than $600 million; our net interest margin increased to 1.90%, and we maintained a Tier 1 capital ratio of 10.72%. And thanks to the hard work of our dedicated associates, we successfully upgraded our primary banking system to support our company and our customers today, and in the future.”
Operating Results for the Quarter Ended June 30, 2026 compared to the Quarter Ended March 31, 2026
Net income rose $7.3 million, or 31.4%, to $30.5 million for the quarter ended June 30, 2026, from $23.2 million in the prior quarter. This increase reflected higher net interest income, a release of provision for credit losses, an increase in non-interest income and a decrease in non-interest expenses.
Net interest income increased $3.6 million, or 4.6%, to $81.4 million for the quarter ended June 30, 2026 from $77.8 million for the quarter ended March 31, 2026. This increase was primarily attributable to a nine basis point increase in the yield on interest-earning assets, primarily loans, partially offset by a five basis point increase in the cost of interest-bearing liabilities. The interest rate spread for the quarter improved by four basis points over the prior quarter to 1.58%, while the net interest margin increased six basis points to 1.90%.
For the quarter ended June 30, 2026, the Company recorded a release of $3.5 million from the provision for credit losses compared to no release or provision recorded for the quarter ended March 31, 2026. The release of provision was driven by a decrease in reserve requirements for longer-term, fixed-rate home equity loans. This segment of the equity loan portfolio has grown in recent years and is outperforming the loss model's expectations. The decrease was partially offset by higher reserve requirements tied to growth in the equity loan and other residential loan portfolios. The total allowance for credit losses decreased $2.9 million during the quarter to $102.0 million, or 0.63% of total loans receivable, from $104.9 million, or 0.67% of total loans receivable, at March 31, 2026. The allowance for unfunded commitments, included in other liabilities, decreased $1.5 million and had a balance of $28.5 million at June 30, 2026 compared to $30.0 million at March 31, 2026. Net recoveries were $0.7 million for the quarter ended June 30, 2026 compared to $0.8 million for the previous quarter. Total loan delinquencies, which have remained historically low for more than 20 years, increased $5.1 million to $43.5 million, or 0.27% of total loans receivable, at June 30, 2026 from $38.4 million, or 0.24% of total loans receivable, at March 31, 2026.
Total non-interest income increased $0.5 million, or 6.7%, to $7.9 million for the quarter ended June 30, 2026 from $7.4 million for the quarter ended March 31, 2026. Changes included increases of $0.2 million in loan fees and service charges, $0.7 million in proceeds from bank owned life insurance contracts, $0.5 million in other non-interest income, primarily related to unrealized gains on interest rate lock commitments treated as derivatives, and a $0.9 million decrease in net gain on the sale of loans.
Total non-interest expense decreased $1.3 million, or 2.3%, to $54.1 million for the quarter ended June 30, 2026 from $55.4 million for the quarter ended March 31, 2026. The change primarily reflected a $1.8 million decrease in salaries and employee benefits, driven by lower group health insurance costs and increases in capitalized payroll costs for loan origination and software development activities. This was partially offset by a $0.5 million increase in office property, equipment and software expense.
Financial Condition at June 30, 2026 compared to March 31, 2026
Total assets increased $595.3 million to $18.08 billion at June 30, 2026 from $17.48 billion at March 31, 2026, mainly due to increases in cash and cash equivalents and mortgage loans held for investment.
Cash and cash equivalents increased $131.6 million, or 30.1%, to $568.9 million at June 30, 2026 from $437.3 million at March 31, 2026, due to normal fluctuations and liquidity management.
Loans held for investment, net of allowance and deferred loan expenses, increased $439.2 million, or 2.8%, to $16.18 billion at June 30, 2026. During the quarter ended June 30, 2026, the combined balances of home equity loans and lines of credit increased $236.1 million to $5.47 billion and residential core mortgage loans increased $201.3 million to $10.67 billion. Marketing efforts and correspondent banking relationships helped drive residential mortgage loan originations and acquisitions to $616.4 million for the quarter ended June 30, 2026 compared to $251.7 for the quarter ended March 31, 2026 and $384.2 for the quarter ended June 30, 2025. Loans held for sale increased $9.4 million to $14.5 million at June 30, 2026, from $5.1 million at March 31, 2026.
Deposits decreased $195.0 million, or 1.9%, to $9.99 billion at June 30, 2026, compared to $10.19 billion at March 31, 2026. The decrease was primarily driven by a $220.9 million decrease in CDs given the competitive nature of deposit pricing and the Company's strategic attention to managing funding costs at the risk of increasing customer attrition. Other changes included a $10.3 million decrease in money market deposit accounts, a $3.9 million decrease in checking accounts and a $40.8 million increase in savings accounts.
Borrowed funds increased $668.5 million, or 13.0%, to $5.81 billion at June 30, 2026, compared to $5.14 billion at March 31, 2026. The increase in borrowed funds included increases in advances from the Federal Home Loan Bank ("FHLB") of Cincinnati and federal funds purchased and was used to fund loan growth and maintain daily liquidity.
Operating Results for the Nine Months Ended June 30, 2026 compared to the Nine Months Ended June 30, 2025
The Company reported net income of $76.1 million for the nine months ended June 30, 2026, an increase of $11.1 million, or 17.1%, compared to net income of $65.0 million for the nine months ended June 30, 2025. The increase was primarily driven by increases in net interest income and non-interest income along with a release of provision for credit losses, partially offset by an increase in non-interest expenses.
Net interest income increased $19.5 million, or 9.1%, to $234.9 million for the nine months ended June 30, 2026 compared to $215.4 million for the nine months ended June 30, 2025. The yield on interest-earning assets, primarily loans, improved by 13 basis points compared to the prior year period, as lower-rate residential mortgages were replaced with higher-yielding mortgage loans and home equity products. The cost of interest-bearing liabilities increased two basis points. The interest rate spread was 1.54% for the nine months ended June 30, 2026 compared to 1.43% for the nine months ended June 30, 2025. The net interest margin was 1.85% for the nine months ended June 30, 2026 and 1.74% for the nine months ended June 30, 2025.
During the nine months ended June 30, 2026, there was a $4.5 million release of provision for credit losses compared to $1.5 million of provision expense recorded during the nine months ended June 30, 2025. Net loan recoveries totaled $2.2 million for the nine months ended June 30, 2026 and $3.1 million for the same period of the prior year.
The total allowance for credit losses decreased $2.4 million to $102.0 million, or 0.63% of total loans receivable, from $104.4 million, or 0.67% of total loans receivable, at September 30, 2025 and decreased $0.4 million from $102.4 million, or 0.66% of total loans receivable at June 30, 2025. The decrease was primarily related to reduced reserve requirements for longer-term, fixed-rate home equity loans offset by an increase in reserve requirements for loan growth. The allowance for credit losses included $28.5 million, $30.1 million and $29.8 million in liabilities for unfunded commitments at June 30, 2026, September 30, 2025 and June 30, 2025, respectively. Total loan delinquencies increased $8.8 million to $43.5 million, or 0.27% of total loans receivable, at June 30, 2026 from $34.7 million, or 0.22% of total loans receivable, at September 30, 2025 and increased $6.8 million from $34.3 million, or 0.22% of total loans receivable, at June 30, 2025. Non-accrual loans totaled $40.3 million, or 0.25% of total loans receivable, at June 30, 2026, compared to $38.7 million, or 0.25% of total loans receivable, at September 30, 2025 and $37.3 million, or 0.24% of total loans receivable at June 30, 2025.
Total non-interest income increased $2.8 million, or 13.6%, to $23.4 million for the nine months ended June 30, 2026, from $20.6 million for the nine months ended June 30, 2025. The increase was primarily due to increases of $0.9 million in loan fees and service charges and $1.9 million in net gain on the sale of loans. During the nine months ended June 30, 2026 and 2025, there were $260.3 million and $210.6 million of loans sold with net gains on the sale of loans totaling $4.9 million and $3.0 million, respectively.
Total non-interest expense for the nine months ended June 30, 2026 increased $13.5 million, or 8.9%, to $165.7 million from $152.2 million for the nine months ended June 30, 2025. There were increases of $7.2 million in salaries and employee benefits, $2.0 million in office property, equipment and software expenses and $4.7 million in other expenses, partially offset by a decrease of $0.5 million in federal insurance premium and assessments. The increase in salaries and benefits was mainly the result of higher staffing levels and an increase in stock-based compensation expenses, as well as a one-time bonus provided to associates in December 2025, totaling $2.2 million, recognizing their contributions to record earnings in fiscal year 2025. The increases were partially offset by a $4.3 million increase in capitalized payroll costs related to the implementation of a new core banking system. The increase in other expenses included increases in credit report fees, due to a higher volume of loan pre-approvals, down payment assistance grants and postage expenses. Additionally, while actuarial adjustments to the defined benefit (pension) plan remained positive, they were lower than the previous year.
Financial Condition at June 30, 2026 compared to September 30, 2025
Total assets increased $618.7 million, or 3.5%, to $18.08 billion at June 30, 2026 from $17.46 billion at September 30, 2025. The increase was mainly the result of increases in cash and cash equivalents and loans held for investment.
Cash and cash equivalents increased $139.5 million, or 32.5%, to $568.9 million at June 30, 2026 from $429.4 million at September 30, 2025, due to normal fluctuations and liquidity management.
Loans held for investment, net of allowance and deferred loan expenses, increased $518.3 million, or 3.3%, to $16.18 billion at June 30, 2026 from $15.66 billion at September 30, 2025. The increase was offset by a $43.2 million decrease in loans held for sale, which totaled $14.5 million at June 30, 2026. Home equity loans and lines of credit increased $660.5 million to $5.47 billion and the residential core mortgage loan portfolio decreased $138.4 million to $10.67 billion.
The changes in loans held for sale and loans held for investment were affected by the volume of loans originated, acquired and sold. During the nine months ended June 30, 2026, residential mortgage loan originations and acquisitions totaled $1.18 billion compared to $760.2 million for the nine months ended June 30, 2025. Of total residential mortgage loans originated and acquired during the most recent period, 84% were purchase transactions. Commitments originated for home equity loans and lines of credit were $1.70 billion for the nine months ended June 30, 2026 compared to $1.87 billion for the nine months ended June 30, 2025.
Deposits decreased $454.6 million, or 4.4%, to $9.99 billion at June 30, 2026 from $10.45 billion at September 30, 2025. The decrease was the result of a $1.19 billion decrease in CDs and a $29.7 million decrease in money market deposit accounts, partially offset by increases of $752.0 million in savings accounts and $4.8 million in checking accounts. The decrease in total CDs included a $1.20 billion decrease in retail CDs, the majority of which moved into savings accounts, and an $18.4 million increase in brokered CD accounts. There were $919.3 million in brokered certificates of deposit at June 30, 2026 compared to $900.9 million at September 30, 2025.
Borrowed funds increased $940.7 million, or 19.3%, to $5.81 billion at June 30, 2026 from $4.87 billion at September 30, 2025. The balance of borrowed funds at June 30, 2026 included $1.34 billion of overnight advances, $1.25 billion of term advances with a weighted average maturity of approximately 1.5 years and $3.05 billion of term advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 2.6 years, all from the FHLB of Cincinnati, and federal funds purchased of $150.0 million.
Total shareholders' equity increased $63.5 million, or 3.4%, to $1.96 billion at June 30, 2026 from $1.89 billion at September 30, 2025. Activity reflects $76.1 million of net income, dividends paid of $45.2 million, $5.0 million in repurchases of the Company's common stock, a $29.8 million net increase in accumulated other comprehensive income and net positive adjustments of $7.8 million related to our stock compensation and employee stock ownership plans. The change in accumulated other comprehensive income was primarily due to a net increase in unrealized gains on swap contracts. During the nine months ended June 30, 2026, a total of 355,241 shares of the Company's common stock were repurchased at an average cost of $14.07 per share. The Company's eighth stock repurchase program, authorized by the Board of Directors in October 2016, allows for a total of 10,000,000 shares to be repurchased, with 4,588,845 remaining shares authorized for repurchase at June 30, 2026.
The Company declared and paid a quarterly dividend of $0.2825 per share during each of the first three fiscal quarters of 2026. 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 dividends 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 7, 2026 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive receipt of up to $1.27 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 7, 2027). The MHC has conducted the member vote to approve the dividend waiver each of the past 13 years under Federal Reserve regulations and for each of those 13 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, 2026 all of the Company's capital ratios exceed the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 10.72%, its Common Equity Tier 1 and Tier 1 ratios were each 16.88% and its total capital ratio was 17.79%.
Presentation slides as of June 30, 2026 will be available on the Company's website, thirdfederal.com, under the Investor Relations link under the "Presentations" menu, beginning July 31, 2026. 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 while creating value for our customers, communities, associates and shareholders. It became part of a public company in 2007 and celebrated its 85 th anniversary in 2023. Third Federal, which lends in 28 states and the District of Columbia, is dedicated to serving consumers with competitive rates and outstanding service. Third Federal, an equal housing lender, has 21 full service branches in Northeast Ohio, two lending offices in Central and Southern Ohio, and 14 full service branches throughout Florida. As of June 30, 2026, the Company’s assets totaled $18.08 billion.
Chairman and CEO Marc A. Stefanski
