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What changed in TFS Financial CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TFS Financial CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+476 added−499 removedSource: 10-K (2024-11-22) vs 10-K (2023-11-21)

Top changes in TFS Financial CORP's 2024 10-K

476 paragraphs added · 499 removed · 395 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

194 edited+24 added−48 removed172 unchanged
Biggest changeAt or For the Years Ended September 30, 2023 2022 2021 (Dollars in thousands) Allowance balance for credit losses on loans (beginning of the year) $ 72,895 $ 64,289 $ 46,937 Adoption of ASU 2016-13 for allowance for credit losses on loans — — 24,095 Charge-offs on real estate loans: Residential Core Ohio 257 234 1,587 Florida — — 377 Other — 13 1 Total Residential Core 257 247 1,965 Total Residential Home Today 320 249 552 Home equity loans and lines of credit Ohio 293 625 1,112 Florida 78 154 784 California 14 29 168 Other 280 146 632 Total Home equity loans and lines of credit 665 954 2,696 Total charge-offs 1,242 1,450 5,213 Recoveries on real estate loans: Residential Core 1,126 2,932 2,385 Residential Home Today 2,451 2,648 2,362 Home equity loans and lines of credit 4,079 5,352 5,621 Construction — 175 20 Total recoveries 7,656 11,107 10,388 Net recoveries 6,414 9,657 5,175 Release of allowance for credit losses on loans (1,994) (1,051) (11,918) Allowance balance for loans (end of the year) $ 77,315 $ 72,895 $ 64,289 Allowance balance for credit losses on unfunded commitments (beginning of the year) $ 27,021 $ 24,970 $ — Adoption of ASU 2016-13 for allowance for credit losses on unfunded commitments — — 22,052 Provision for credit losses on unfunded commitments 494 2,051 2,918 Allowance balance for unfunded loan commitments (end of the year) 27,515 27,021 24,970 Allowance balance for all credit losses (end of the year) $ 104,830 $ 99,916 $ 89,259 Ratios: Allowance for credit losses to non-accrual loans at end of the year 242.26 % 204.73 % 145.96 % Allowance for credit losses to the total amortized cost in loans at end of the year 0.51 % 0.51 % 0.51 % 21 Table of Contents The following table sets forth additional information with respect to net recoveries (charge-offs) by category for the periods indicated.
Biggest changeAt or For the Years Ended September 30, 2024 2023 2022 (Dollars in thousands) Allowance balance for credit losses on loans (beginning of the year) $ 77,315 $ 72,895 $ 64,289 Adoption of ASU 2022-02 (10,262) — — Charge-offs on real estate loans: Residential Core Ohio 221 257 234 Florida 5 — — Other — — 13 Total Residential Core 226 257 247 Total Residential Home Today 112 320 249 Home equity loans and lines of credit Ohio 388 293 625 Florida 128 78 154 California 109 14 29 Other 250 280 146 Total Home equity loans and lines of credit 875 665 954 Total charge-offs 1,213 1,242 1,450 Recoveries on real estate loans: Residential Core 1,249 1,126 2,932 Residential Home Today 2,105 2,451 2,648 Home equity loans and lines of credit 2,584 4,079 5,352 Construction 20 — 175 Total recoveries 5,958 7,656 11,107 Net recoveries 4,745 6,414 9,657 Release of allowance for credit losses on loans (1,796) (1,994) (1,051) Allowance balance for loans (end of the year) $ 70,002 $ 77,315 $ 72,895 Allowance balance for credit losses on unfunded commitments (beginning of the year) $ 27,515 $ 27,021 $ 24,970 Provision for credit losses on unfunded commitments 296 494 2,051 Allowance balance for unfunded loan commitments (end of the year) 27,811 27,515 27,021 Allowance balance for all credit losses (end of the year) $ 97,813 $ 104,830 $ 99,916 Ratios: Allowance for credit losses on loans to non-accrual loans at end of the year 208.28 % 242.26 % 204.73 % Allowance for credit losses on loans to the total amortized cost in loans at end of the year 0.45 % 0.51 % 0.51 % 19 Table of Contents The following table sets forth additional information with respect to net recoveries (charge-offs) by category for the periods indicated.
All savings associations have a responsibility under the CRA and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a federal savings association, the OCC is required to assess the savings association’s record of compliance with the CRA.
All federal savings associations have a responsibility under the CRA and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a federal savings association, the OCC is required to assess the association’s record of compliance with the CRA.
In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.
In addition, federal regulations prohibit a federal savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.
For this purpose, a federal savings association is placed in one of the following five categories based on its capital: • well capitalized (at least 5% leverage capital, 8% Tier 1 risk-based capital, 10% total risk-based capital, and 6.5% common equity Tier 1 ratios, and is not subject to any written agreement, order, capital directive or prompt corrective action directive issued under certain statutes and regulations, to maintain a specific capital level for any capital measure); • adequately capitalized (at least 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital and 4.5% common equity Tier 1 ratios); • undercapitalized (less than 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital, or 4.5% common equity Tier 1 ratios); • significantly undercapitalized (less than 3% leverage capital, 4% Tier 1 risk-based capital, 6% total risk-based capital or 3% common equity Tier 1 ratios); and • critically undercapitalized (less than or equal to 2% tangible capital to total assets).
For this purpose, a federal savings association is placed in one of the following five categories based on its capital: • well capitalized (at least 5% leverage capital, 8% Tier 1 risk-based capital, 10% total risk-based capital, and 6.5% common equity Tier 1 capital ratios, and is not subject to any written agreement, order, capital directive or prompt corrective action directive issued under certain statutes and regulations, to maintain a specific capital level for any capital measure); • adequately capitalized (at least 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital and 4.5% common equity Tier 1 capital ratios); • undercapitalized (less than 4% leverage capital, 6% Tier 1 risk-based capital, 8% total risk-based capital, or 4.5% common equity Tier 1 capital ratios); • significantly undercapitalized (less than 3% leverage capital, 4% Tier 1 risk-based capital, 6% total risk-based capital or 3% common equity Tier 1 capital ratios); and • critically undercapitalized (less than or equal to 2% tangible capital to total assets).
Pursuant to Section 10(o) of the HOLA and FRS regulations, a mutual holding company, such as Third Federal Savings, MHC and its mid-tier holding company, the Company, may, with appropriate regulatory approval, engage in the following activities: (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of the Company or an interim savings association subsidiary of the Company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association has its home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings association subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity: (A) that the FRS, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the FRS, by regulation, prohibits or limits any such activity for savings and loan holding companies; or (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; (x) if the savings and loan holding company meets the criteria to qualify as a financial holding company, any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act, including securities and insurance underwriting; and (xi) purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the FRS.
Pursuant to Section 10(o) of the HOLA and FRS regulations, a mutual holding company, such as Third Federal Savings, MHC and its mid-tier holding company, the Company, may, with appropriate regulatory approval, engage in the following activities: (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of the Company or an interim savings association subsidiary of the Company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association has its home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings association subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity: (A) that the FRS, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the FRS, by regulation, prohibits or limits any such activity for savings and loan holding companies; or 31 Table of Contents (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; (x) if the savings and loan holding company meets the criteria to qualify as a financial holding company, any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act, including securities and insurance underwriting; and (xi) purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the FRS.
The Association’s principal business consists of originating and servicing residential real estate mortgage loans and attracting retail savings deposits. The Association’s business strategy is to originate mortgage loans with interest rates that are competitive with those of similar products offered by other financial institutions in its markets.
The Association’s principal business consists of originating and servicing residential real estate mortgage loans and attracting retail savings deposits. The Association’s primary business strategy is to originate mortgage loans with interest rates that are competitive with those of similar products offered by other financial institutions in its markets.
The OCC and the FRS have established similar criteria for approving an application or notice, and may disapprove an application or notice if: • the savings association would be undercapitalized following the distribution; • the proposed capital distribution raises safety and soundness concerns; or • the capital distribution would violate a prohibition contained in any statute, regulation or agreement.
The OCC and the FRS have established similar criteria for approving an application or notice, and may disapprove an application or notice if: • the association would be undercapitalized following the distribution; • the proposed capital distribution raises safety and soundness concerns; or • the capital distribution would violate a prohibition contained in any statute, regulation or agreement.
The FDIC also has the authority to terminate deposit insurance or to recommend to the OCC that enforcement action be taken with respect to a particular federal savings institution. If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances. Standards for Safety and Soundness.
The FDIC also has the authority to terminate deposit insurance or to recommend to the OCC that an enforcement action be taken with respect to a particular federal savings institution. If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances. Standards for Safety and Soundness.
The Company originates its home equity loans and home equity lines of credit without application fees (except for bridge loans) or borrower-paid closing costs. Home equity loans are offered with fixed interest rates, are fully amortizing and have terms of up to 30 years.
The Company originates its home equity loans and home equity lines of credit without application fees (except for bridge loans) or borrower-paid closing costs. Home equity loans are offered with variable and fixed interest rates, are fully amortizing and have terms of up to 30 years.
The Association retains in its portfolio a large portion of the loans that it originates. The Association also purchases residential real estate mortgage loans through a correspondent lending partnership. Loans that the Association sells consist primarily of long-term, fixed-rate residential real estate mortgage loans. The Association retains the servicing rights on all loans that it sells.
The Association retains in its portfolio a large portion of the loans that it originates. The Association also purchases residential real estate mortgage loans through a correspondent lending partnership. Loans that the Association sells consist primarily of long-term, fixed-rate residential real estate mortgage loans. The Association currently retains the servicing rights on all loans that it sells.
The Association may also establish subsidiaries that may engage in certain activities not otherwise permissible for an association, including real estate investment and securities and insurance brokerage. A federal savings association may elect to exercise national bank powers without converting to a national bank charter.
The Association may also establish subsidiaries that may engage in certain activities not otherwise permissible for a federal savings association, including real estate investment and securities and insurance brokerage. A federal savings association may elect to exercise national bank powers without converting to a national bank charter.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or condition imposed by the FDIC.
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 the value of our goodwill or other intangible assets; ● 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.
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 the value of our goodwill or other intangible assets; ● 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 a wide-spread pandemic, and related government action, on our business and the economy.
In addition, based on the same statistics, the Association has consistently been one of the twenty largest lenders in both Franklin County (Columbus, Ohio) and Hamilton County (Cincinnati, Ohio) since it entered those markets in 1999.
In addition, based on the same statistics, the Association has consistently been one of the twenty-five largest lenders in both Franklin County (Columbus, Ohio) and Hamilton County (Cincinnati, Ohio) since it entered those markets in 1999.
The Company’s home equity lines of credit are offered with adjustable rates of interest indexed to the Prime Rate, as reported in The Wall Street Journal . 12 Table of Contents The following table sets forth credit exposure, principal balance, percent delinquent 90 days or more, the mean CLTV percent at the time of origination and the current mean CLTV percent of our home equity loans, home equity lines of credit and bridge loan portfolio as of September 30, 2023.
The Company’s home equity lines of credit are offered with adjustable rates of interest indexed to the Prime Rate, as reported in The Wall Street Journal . 12 Table of Contents The following table sets forth credit exposure, principal balance, percent delinquent 90 days or more, the mean CLTV percent at the time of origination and the current mean CLTV percent of our home equity loans, home equity lines of credit and bridge loan portfolio as of September 30, 2024.
The OCC has primary enforcement responsibility over federal savings associations and has the authority to bring enforcement action against all “institution-affiliated parties,” a term that includes shareholders who participate in the affairs of the association, as well as attorneys, appraisers and accountants who knowingly or recklessly participate in violations of law or regulation, breaches of fiduciary duty, or unsafe or unsound practices.
The OCC has primary enforcement responsibility over federal savings associations and has the authority to bring enforcement actions against all “institution-affiliated parties,” a term that includes shareholders who participate in the affairs of the association, as well as attorneys, appraisers and accountants who knowingly or recklessly participate in violations of law or regulation, breaches of fiduciary duty, or unsafe or unsound practices.
For the fiscal year ended September 30, 2023, Third Cap Associates, Inc. recorded net income of $0.2 million. THIRD FEDERAL SAVINGS AND LOAN ASSOCIATION OF CLEVELAND General The Association is a federally chartered savings and loan association headquartered in Cleveland, Ohio, that was organized in 1938. In 1997, the Association reorganized into its current two-tier mutual holding company structure.
For the fiscal year ended September 30, 2024, Third Cap Associates, Inc. recorded net income of $0.2 million. THIRD FEDERAL SAVINGS AND LOAN ASSOCIATION OF CLEVELAND General The Association is a federally chartered savings and loan association headquartered in Cleveland, Ohio, that was organized in 1938. In 1997, the Association reorganized into its current two-tier mutual holding company structure.
At September 30, 2023, the Association exceeded the fully phased in regulatory requirement for the "capital conservation buffer." In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. As presented in Note 3.
At September 30, 2024, the Association exceeded the fully phased in regulatory requirement for the "capital conservation buffer." In assessing an institution’s capital adequacy, the OCC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. As presented in Note 3.
There were no dividends paid to the Company by Third Capital, the Company's other wholly owned subsidiary, during the fiscal years ended September 30, 2023, 2022 or 2021. The Company's eighth stock repurchase program, for the repurchase of 10,000,000 shares of its common stock, was announced on October 27, 2016 and began on January 6, 2017.
There were no dividends paid to the Company by Third Capital, the Company's other wholly owned subsidiary, during the fiscal years ended September 30, 2024, 2023 or 2022. The Company's eighth stock repurchase program, for the repurchase of 10,000,000 shares of its common stock, was announced on October 27, 2016, and began on January 6, 2017.
As of September 30, 2023, we held no asset-backed securities or securities with sub-prime credit risk exposure, nor did we hold any banker’s acceptances, term federal funds, repurchase agreements or reverse repurchase agreements. As a federal savings association, the Association is not permitted to invest in equity securities. This general restriction does not apply to the Company.
As of September 30, 2024, we held no asset-backed securities or securities with sub-prime credit risk exposure, nor did we hold any banker’s acceptances, term federal funds, repurchase agreements or reverse repurchase agreements. As a federal savings association, the Association is not permitted to invest in equity securities. This general restriction does not apply to the Company.
REGULATORY MATTERS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , at September 30, 2023, the Association exceeded all regulatory capital requirements to be considered “Well Capitalized.” Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.
REGULATORY MATTERS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , at September 30, 2024, the Association exceeded all regulatory capital requirements to be considered “Well Capitalized.” Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus.
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of September 30, 2023, the Association was in compliance with the loans-to-one borrower limitations. Qualified Thrift Lender Test.
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of September 30, 2024, the Association was in compliance with the loans-to-one borrower limitations. Qualified Thrift Lender Test.
However, at September 30, 2023, a reserve of $0.4 million has been maintained to cover potential losses on repurchases or reimbursements that may arise in connection with representations and warranties made at time of sale. The Company requires title insurance on all of its residential real estate mortgage loans.
However, at September 30, 2024, a reserve of $0.4 million has been maintained to cover potential losses on repurchases or reimbursements that may arise in connection with representations and warranties made at time of sale. The Company requires title insurance on all of its residential real estate mortgage loans.
The loan term cannot be extended in connection with a re-lock, nor can new funds be advanced. All interest rate caps and floors remain as originated. "Smart Rate" adjustable-rate mortgage loans represent over 99% of the adjustable-rate mortgage loan portfolio, with the difference representing the remaining balance of legacy adjustable-rate mortgage loan products with slightly different interest rate reset terms.
The loan term cannot be extended in connection with a re-lock, nor can new funds be advanced. All interest rate caps and floors remain as originated. "Smart Rate" adjustable-rate mortgage loans represent 99.6% of the adjustable-rate mortgage loan portfolio, with the difference representing the remaining balance of legacy adjustable-rate mortgage loan products with slightly different interest rate reset terms.
At September 30, 2023, Third Capital, Inc. had consolidated assets of $9.0 million, and for the fiscal year ended September 30, 2023, Third Capital, Inc. had consolidated net income of $0.2 million. Third Capital, Inc. has no separate operations other than as the holding company for its operating subsidiaries, and as a minority investor or partner in other entities.
At September 30, 2024, Third Capital, Inc. had consolidated assets of $9.2 million, and for the fiscal year ended September 30, 2024, Third Capital, Inc. had consolidated net income of $0.2 million. Third Capital, Inc. has no separate operations other than as the holding company for its operating subsidiaries, and as a minority investor or partner in other entities.
As of September 30, 2023, the only remaining entity in which Third Capital, Inc. has an investment in is Third Cap Associates, Inc., an Ohio corporation that owns 49% and 60% of two title agencies that provide escrow and settlement services in the States of Ohio, Florida and New Jersey, primarily to customers of the Association.
As of September 30, 2024, the only remaining entity in which Third Capital, Inc. has an investment in is Third Cap Associates, Inc., an Ohio corporation that owns 49% and 60% of two title agencies that provide escrow and settlement services in the States of Ohio, Florida and New Jersey, primarily to customers of the Association.
Information on that website is not and should not be considered a part of this document. Market Area The Association conducts its operations from its main office in Cleveland, Ohio, and from 37 additional, full-service branches and four loan production offices located throughout the states of Ohio and Florida.
Information on that website is not and should not be considered a part of this document. Market Area The Association conducts its operations from its main office in Cleveland, Ohio, and from 37 additional, full-service branches and two loan production offices located throughout the states of Ohio and Florida.
Third, our CEO remains accessible to both local and national media, as a spokesman for our institution as well as an observer and interpreter of financial marketplace situations and events. Fourth, we periodically include advertisements in local newspapers and online that display our strong capital levels and history of service.
Third, our CEO remains accessible to both local and national media, as a spokesman for our institution as well as an observer and interpreter of financial marketplace situations and events. Fourth, we periodically include advertisements in local newspapers and online which display our strong capital levels and history of service.
(2) Mean CLTV percent at origination for all home equity lines of credit is based on the committed amount. (3) Current Mean CLTV is based on best available first mortgage and property values as of September 30, 2023. Property values are estimated using HPI data published by the FHFA.
(2) Mean CLTV percent at origination for all home equity lines of credit is based on the committed amount. (3) Current Mean CLTV is based on best available first mortgage and property values as of September 30, 2024. Property values are estimated using HPI data published by the FHFA.
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; ● 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; ● future adverse developments concerning Fannie Mae or Freddie Mac; ● changes in monetary and fiscal policy of the U.S.
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; ● future adverse developments concerning Fannie Mae or Freddie Mac; ● changes in monetary and fiscal policy of the U.S.
The Association also has the ability to purchase overnight Fed Funds up to $585.0 million through arrangements with other institutions. The ability to borrow from the FRB-Cleveland Discount Window is also available to the Association and is secured by a pledge of specific loans in the Association’s mortgage portfolio.
The Association also has the ability to purchase overnight Fed Funds up to $395.0 million through arrangements with other institutions. The ability to borrow from the FRB-Cleveland Discount Window is also available to the Association and is secured by a pledge of specific loans in the Association’s mortgage portfolio.
Together, the BSA and USA PATRIOT Act require the Association to implement internal controls, conduct customer due diligence, maintain records, and file reports. 32 Table of Contents • Regulations of the Office of Foreign Assets Control that enforce economic and trade sanctions against targeted foreign countries, regimes, and other designated individuals and organizations; and • The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
Together, the BSA and USA PATRIOT Act require the Association to implement internal controls, conduct customer due diligence, maintain records, and file reports; • Regulations of the Office of Foreign Assets Control that enforce economic and trade sanctions against targeted foreign countries, regimes, and other designated individuals and organizations; • The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
We rely on the reputation that has been built during the Association’s 85-year history of serving its customers and the communities in which it operates, the Association’s high capital levels, and the Association's extensive liquidity alternatives which, in combination, serve to maintain and nurture customer and marketplace confidence.
We rely on the reputation that has been built during the Association’s 86-year history of serving its customers and the communities in which it operates, the Association’s high capital levels, and the Association's extensive liquidity alternatives which, in combination, serve to maintain and nurture customer and marketplace confidence.
See Delinquent Loans and Non-performing Assets and Restructured Loans for discussions of the asset quality of this portion of the Company’s loan portfolio. The Company currently retains the servicing rights on all loans sold in order to generate fee income and reinforce its commitment to customer service.
See Delinquent Loans and Non-performing Assets and Modified Loans for discussions of the asset quality of this portion of the Company’s loan portfolio. The Company currently retains the servicing rights on all loans sold in order to generate fee income and reinforce its commitment to customer service.
The Company offers home equity loans and home equity lines of credit, which are primarily secured by a second mortgage on residences. The home equity product is offered in 25 states and the District of Columbia. Home equity lines of credit originated since 2013 require amortizing loan payments during the draw period.
The Company offers home equity loans and home equity lines of credit, which are primarily secured by a second mortgage on residences. The home equity product is offered in 27 states and the District of Columbia. Home equity lines of credit originated since 2013 require amortizing loan payments during the draw period.
Similarly, the Association offers checking accounts, savings accounts and certificate of deposit accounts, each bearing interest rates that are competitive with similar products offered by other financial institutions in its markets. The Association expects to continue to pursue this business philosophy.
Similarly, the Association offers checking accounts, savings accounts, money market accounts and certificate of deposit accounts, each bearing interest rates that are competitive with similar products offered by other financial institutions in its markets. The Association expects to continue to pursue this business philosophy.
Government, and government-sponsored entities, which include Fannie Mae and Freddie Mac. The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae as well as collateralized mortgage obligations and real estate mortgage investment conduits issued or backed by securities issued by these governmental agencies and government-sponsored entities.
The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae as well as collateralized mortgage obligations and real estate mortgage investment conduits issued or backed by securities issued by these governmental agencies and government-sponsored entities.
From October 2022 through August 2023 (the latest date for which information is publicly available), per data furnished by MarketTrac ® , the Association had the second largest market share of conventional purchase mortgage loans originated in Cuyahoga County, Ohio.
From October 2023 through August 2024 (the latest date for which information is publicly available), per data furnished by MarketTrac ® , the Association had the second largest market share of conventional purchase mortgage loans originated in Cuyahoga County, Ohio.
At September 30, 2023, substantially all of the loans serviced for Fannie Mae and others were performing in accordance with their contractual terms and management believes that it had no material repurchase obligations associated with these loans at that date.
At September 30, 2024, substantially all of the loans serviced for Fannie Mae and others were performing in accordance with their contractual terms and management believes that it had no material repurchase obligations associated with these loans at that date.
Borrowings from the FHLB of Cincinnati are secured by the Association’s investment in the common stock of the FHLB of Cincinnati as well as by a blanket pledge of its mortgage portfolio not otherwise pledged. Our current, maximum borrowing capacity with the FHLB of Cincinnati is $6.63 billion.
Borrowings from the FHLB of Cincinnati are secured by the Association’s investment in the common stock of the FHLB of Cincinnati as well as by a blanket pledge of its mortgage portfolio not otherwise pledged. Our current, maximum borrowing capacity with the FHLB of Cincinnati is $6.86 billion.
The Company’s primary lending activity is the origination of residential real estate mortgage loans. A comparison of 2023 data to the corresponding 2022 data can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation .
The Company’s primary lending activity is the origination of residential real estate mortgage loans. A comparison of 2024 data to the corresponding 2023 data can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation .
Factors impacting the determination of qualitative GVAs include: • changes in lending policies and procedures including underwriting standards, collection, charge-off or recovery practices; • management's view of changes in national, regional, and local economic and business conditions and trends including treasury yields, housing market factors and trends, such as the status of loans in foreclosure, real estate in judgment and real estate owned, and unemployment statistics and trends and how it aligns with economic modeling forecasts; • changes in the nature and volume of the portfolios including home equity lines of credit nearing the end of the draw period and adjustable-rate mortgage loans nearing a rate reset; • changes in the experience, ability or depth of lending management; • changes in the volume or severity of past due loans, volume of non-accrual loans, or the volume and severity of adversely classified loans including the trending of delinquency statistics (both current and historical), historical loan loss experience and trends, the frequency and magnitude of multiple restructurings of loans previously the subject of TDRs, and uncertainty surrounding borrowers’ ability to recover from temporary hardships for which short-term loan restructurings are granted; • changes in the quality of the loan review system; • changes in the value of the underlying collateral including asset disposition loss statistics (both current and historical) and the trending of those statistics, and additional charge-offs and recoveries on individually reviewed loans; 19 Table of Contents • existence of any concentrations of credit; • effect of other external factors such as competition, market interest rate changes or legal and regulatory requirements including market conditions and regulatory directives that impact the entire financial services industry; and • limitations within our models to predict life of loan net losses.
Factors impacting the determination of qualitative GVAs include, among other: • changes in lending policies and procedures including underwriting standards, collection, charge-off or recovery practices; • management's view of changes in national, regional, and local economic and business conditions and trends including treasury yields, housing market factors and trends, such as the status of loans in foreclosure, real estate in judgment and real estate owned, and unemployment statistics and trends and how it aligns with economic modeling forecasts; • changes in the nature and volume of the portfolios including home equity lines of credit nearing the end of the draw period and adjustable-rate mortgage loans nearing a rate reset; • changes in the experience, ability or depth of lending management; • changes in the volume or severity of past due loans, volume of non-accrual loans, or the volume and severity of adversely classified loans including the trending of delinquency statistics (both current and historical), historical loan loss experience and trends, the frequency and magnitude of loan modifications, and uncertainty surrounding borrowers’ ability to recover from temporary hardships for which short-term loan restructurings are granted; • changes in the quality of the loan review system; • changes in the value of the underlying collateral including asset disposition loss statistics (both current and historical) and the trending of those statistics, and additional charge-offs and recoveries on individually reviewed loans; • existence of any concentrations of credit; • effect of other external factors such as competition, market interest rate changes or legal and regulatory requirements including market conditions and regulatory directives that impact the entire financial services industry; and • limitations within our models to predict life of loan net losses.
For more information regarding the allowance for credit losses, see Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . 20 Table of Contents The following table sets forth activity for credit losses segregated by geographic location for the periods indicated.
For more information regarding the allowance for credit losses, see Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . 18 Table of Contents The following table sets forth activity for credit losses segregated by geographic location for the periods indicated.
All of the Company’s adjustable-rate mortgage loans are subject to periodic and lifetime limitations on interest rate changes. All adjustable-rate mortgage loans have initial and periodic caps of two percentage points on interest rate changes, with a cap of five or six percentage points for the life of the loan.
All of the Company’s adjustable-rate mortgage loans are subject to periodic and lifetime limitations on interest rate changes. All adjustable-rate mortgage loans have initial and periodic caps of two percentage points on interest rate changes, with a cap of six percentage points for the life of the loan.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties. • The Dodd-Frank Act, which holds lenders accountable for ensuring a borrower's ability to repay a mortgage.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties; and • The DFA, which holds lenders accountable for ensuring a borrower's ability to repay a mortgage.
If necessary, subsequent late charges and delinquent notices are issued and the borrower’s account will be 15 Table of Contents monitored on a regular basis thereafter. The Company also mails system-generated reminder notices on a monthly basis. When a loan is more than 30 days past due, the Company attempts to contact the borrower and develop a plan of repayment.
If necessary, subsequent late charges and delinquent notices are issued and the borrower’s account will be monitored on a regular basis thereafter. The Company also mails system-generated reminder notices on a monthly basis. When a loan is more than 30 days past due, the Company attempts to contact the borrower and develop a plan of repayment.
Third Federal Savings, MHC previously received the approval of its members every calendar year beginning in 2014. Conversion of Third Federal Savings, MHC to Stock Form . Federal regulations permit Third Federal Savings, MHC to convert from the mutual form of organization to the capital stock form of organization (a “Conversion Transaction”).
Third Federal Savings, MHC has received the approval of its members every calendar year beginning in 2014. Conversion of Third Federal Savings, MHC to Stock Form . Federal regulations permit Third Federal Savings, MHC to convert from the mutual form of organization to the capital stock form of organization (a “Conversion Transaction”).
On an ongoing basis, we further promote the health and wellness of our associates by strongly encouraging work-life balance, offering flexible work schedules, keeping the associate portion of health care premiums to a minimum and sponsoring various wellness programs, whereby associates are compensated for incorporating healthy habits into their daily routines.
On an ongoing basis, we further promote the health and wellness of our associates by strongly encouraging work-life balance, offering flexible work schedules, keeping the associate portion of health care premiums to a minimum and sponsoring various wellness programs, whereby associates are compensated for incorporating healthy habits into their daily routines. 33 Table of Contents
For the same period, it also had the second largest market share of conventional purchase mortgage loans originated in the seven northeast Ohio counties which comprise the Cleveland and Akron metropolitan statistical areas.
For the same period, it also had the third largest market share of conventional purchase mortgage loans originated in the seven northeast Ohio counties which comprise the Cleveland and Akron metropolitan statistical areas.
On November 16, 2023, the FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5 billion in assets, in order to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in March 2023.
On November 16, 2023, the FDIC approved a final rule to implement a special assessment on certain banking organizations with financial institution subsidiaries with more than $5 billion in assets, in order to recover the costs associated 29 Table of Contents with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in March 2023.
Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are substantially the same or at least as favorable to the institution as comparable transactions with non-affiliates. Federal savings associations are required to maintain detailed records of all transactions with affiliates.
Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are substantially the same or at least as favorable to the institution as comparable transactions with non-affiliates. Federal savings associations are required to maintain detailed records of all transactions with affiliates. Extensions of Credit to Insiders.
Demand loans, loans having no stated repayment schedule or maturity, are reported as being due in the fiscal year ending September 30, 2024. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.
Loans having no stated repayment schedule or maturity are reported as being due in the fiscal year ending September 30, 2025. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.
It also prohibits the acquisition or 33 Table of Contents retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities other than those permitted by the HOLA or acquiring or retaining control of an institution that is not federally insured.
It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities other than those permitted by the HOLA or acquiring or retaining control of an institution that is not federally insured.
The Company’s policies and loan approval limits are established by its Board of Directors. The Company’s Board of Directors has delegated authority to its Executive Committee (consisting of the Company’s Chief Executive Officer and two directors) to review and assign lending authorities to certain individuals of the Company to consider and approve loans within their designated authority.
The Company’s policies and loan approval limits are established by its Board of Directors. The Company’s Board of Directors has delegated authority to its Executive Committee (consisting of the Company’s CEO and two directors) to review and assign lending authorities to certain individuals of the Company to consider and approve loans within their designated authority.
At September 30, 2023, 12.9% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance. Minimum payments include both a principal and interest component. Construction Loans. The Company originates construction loans to individuals for the construction of their personal single-family residence by a qualified builder (construction/permanent loans).
At September 30, 2024, 12.5% of the home equity line of credit portfolio in the draw period were making only the minimum payment on the outstanding line balance. Minimum payments include both a principal and interest component. Construction Loans. The Company originates construction loans to individuals for the construction of their personal single-family residence by a qualified builder (construction/permanent loans).
Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or 18 Table of Contents improbable.
Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
Upon the loan being underwritten based on a fully amortizing payment schedule and maximum interest rate during the first five years, as well as meeting the other qualifications above, the loan is determined to be a "qualified mortgage" and therefore presumed to have complied with the ability-to-repay standard under the Dodd-Frank Act. Holding Company Regulation General .
Upon the loan being underwritten based on a fully amortizing payment schedule and maximum interest rate during the first five years, as well as meeting the other qualifications above, the loan is determined to be a "qualified mortgage" and therefore presumed to have complied with the ability-to-repay standard under the DFA. Holding Company Regulation General .
As of September 30, 2023, the Association exceeded all regulatory requirements to be considered “Well Capitalized” as presented in the table below (dollar amounts in thousands).
As of September 30, 2024, the Association exceeded all regulatory requirements to be considered “Well Capitalized” as presented in the table below (dollar amounts in thousands).
As part of a loan retention program, these adjustable-rate loans provide the borrower with an attractive rate reset option, which allow the borrower to re-lock the rate an unlimited number of times at the Company’s then current lending rates, for another three or five years (which must be the same as the original lock period).
As part of a loan retention program, these adjustable-rate loans provide the borrower with an attractive rate reset option, which allows the borrower to re-lock the rate an unlimited number of times at the Company’s then current lending rates, for another three or five years (which must be the same as the original lock period), generally for a fee.
In Ohio, the Association maintains 21 full-service offices located in the northeast Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit, one regional loan production office located in the central Ohio (Columbus, Ohio) and three loan production offices located in the southern Ohio counties of Butler and Hamilton (Cincinnati, Ohio).
In Ohio, the Association maintains 21 full-service offices located in the northeast Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit, one regional loan production office located in the central Ohio (Columbus, Ohio) and one regional loan production office located in the southern Ohio county of Butler (Cincinnati, Ohio).
The percentage of loans seriously delinquent to total net loans decreased in the residential Core portfolio from 0.06% to 0.05%. Such loans in the residential Home Today portfolio remained at 0.01%. Home equity loans and lines of credit portfolio increased from 0.02% to 0.03%.
The percentage of loans seriously delinquent to total net loans increased in the residential Core portfolio from 0.05% to 0.06% year to year. Such loans in the residential Home Today portfolio remained at 0.01%. Home equity loans and lines of credit portfolio remained at 0.03%.
For the Years Ended September 30, 2023 2022 2021 (Dollars in thousands) Net recoveries to average loans outstanding during the year Real estate loans: Residential Core 0.01 % 0.02 % — % Residential Home Today 0.01 % 0.02 % 0.02 % Home Equity loans and lines of credit 0.02 % 0.03 % 0.02 % Total net recoveries to average loans outstanding 0.04 % 0.07 % 0.04 % We continue to evaluate loans becoming delinquent for potential losses and record provisions for the estimate of those losses.
For the Years Ended September 30, Net recoveries to average loans outstanding during the year 2024 2023 2022 Real estate loans: Residential Core 0.01 % 0.01 % 0.02 % Residential Home Today 0.01 % 0.01 % 0.02 % Home Equity loans and lines of credit 0.01 % 0.02 % 0.03 % Total net recoveries to average loans outstanding 0.03 % 0.04 % 0.07 % We continue to evaluate loans becoming delinquent for potential losses and record provisions for the estimate of those losses.
Management’s Discussion and Analysis of Financial Condition and Results of Operation - Controlling Our Interest Rate Risk Exposure , only a portion of the Company's first mortgage loan originations and purchases are eligible for securitization and sale in Fannie Mae mortgage backed security form. The balance of loans held for sale was $3.3 million at September 30, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operation - Controlling Our Interest Rate Risk Exposure , only a portion of the Company's first mortgage loan originations and purchases are eligible for securitization and sale in Fannie Mae mortgage backed security form. The balance of loans held for sale was $17.8 million at September 30, 2024.
We recorded a $1.5 million net release for credit losses for the year, consisting of a $2.0 million release from credit losses on loans and a $0.5 million reclassification to credit losses on off-balance sheet exposures.
We recorded a $1.5 million net release for credit losses for the year, consisting of a $1.8 million release from credit losses on loans and a $0.3 million reclassification to credit losses on off-balance sheet exposures.
Our cash flow depends primarily on earnings from the investment of proceeds we retained from the initial offering, and any dividends we receive from the Association and Third Capital, Inc. All of our officers are also officers of the Association. In addition, we use the services of the support staff of the Association from time to time.
Our cash flow depends primarily on earnings from the investment in the Association, and any dividends we receive from the Association and Third Capital, Inc. All of our officers are also officers of the Association. In addition, we use the services of the support staff of the Association from time to time.
As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $1.2 million at September 30, 2023 and $1.0 million at September 30, 2022.
As we are no longer originating loans under our Home Today program, there is an expected net recovery position for this portfolio which was $2.7 million at September 30, 2024, and $1.2 million at September 30, 2023.
Third Federal Savings, MHC has the approval to waive the receipt of dividends up to an aggregate of $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 11, 2023.
Third Federal Savings, MHC has the approval to waive the receipt of dividends up to an aggregate of $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 9, 2024.
During the fiscal year ended September 30, 2023, the Company sold, or committed to sell, to Fannie Mae, in either whole loan or security form, $77.2 million of long-term, fixed-rate residential real estate mortgage loans, all on a servicing retained basis. The Company has also previously sold to private parties, non-agency eligible, adjustable-rate loans on a servicing retained basis.
During the fiscal year ended September 30, 2024, the Company sold, or committed to sell, to Fannie Mae, in either whole loan or security form, $247.4 million of long-term, fixed-rate residential real estate mortgage loans, all on a servicing retained basis. The Company has also previously sold to private parties, non-agency eligible, adjustable-rate loans on a servicing retained basis.
Third Federal Savings, MHC received the approval of its members (depositors and certain loan customers of the Association) with respect to the waiver of dividends, and subsequently received the non-objection of the FRB-Cleveland, to waive dividends aggregating up to $1.13 per share on the common stock of the Company for the 12 34 Table of Contents months following the special meeting of members held on July 11, 2023.
Third Federal Savings, MHC received the approval of its members (depositors and certain loan customers of the Association) with respect to the waiver of dividends, and subsequently received the non-objection of the FRB-Cleveland, to waive dividends aggregating up to $1.13 per share on the common stock of the 32 Table of Contents Company for the 12 months following the special meeting of members held on July 9, 2024.
As of September 30, 2023, 5,191,951 shares remain to be purchased under the program.
As of September 30, 2024, 5,191,951 shares remain to be purchased under the program.
By the 90 th day of delinquency, the Company may recommend foreclosure. The loan will be evaluated based on collateral prior to the 180th day of delinquency. For further discussion on evaluating collateral-dependent loans, see Note 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .
By the 90 th day of 15 Table of Contents delinquency, the Company may recommend foreclosure. The loan will be evaluated based on collateral prior to the 180th day of delinquency. For further discussion on evaluating collateral-dependent loans, refer to Note 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .
We have prepared policies, procedures and systems designed to ensure compliance with this law and related regulations. Human Capital Resources At September 30, 2023, we employed 995 associates, nearly all of whom are full-time and of which approximately 74% are women. At September 30, 2022, we employed 1,025 associates.
We have prepared policies, procedures and systems designed to ensure compliance with this law and related regulations. Human Capital Resources At September 30, 2024, we employed 919 associates, nearly all of whom are full-time and of which approximately 74% are women. At September 30, 2023, we employed 995 associates.
During the fiscal years ended September 30, 2023 and 2022, the Company recognized servicing fees, net of amortization, related to these servicing rights of $4.5 million and $4.3 million, respectively. As of September 30, 2023 and 2022, the principal balance of loans serviced for others totaled $1.93 billion and $2.05 billion, respectively.
During the fiscal years ended September 30, 2024 and 2023, the Company recognized servicing fees, net of amortization, related to these servicing rights of $4.3 million and $4.5 million, respectively. As of September 30, 2024 and 2023, the principal balance of loans serviced for others totaled $1.97 billion and $1.93 billion, respectively.
Additionally, at September 30, 2023 and 2022, the undrawn amounts of home equity lines of credit totaled $4.70 billion and $4.08 billion, respectively. A bridge loan permits a borrower to utilize the existing equity in their current home to fund the purchase of a new home before the current home is sold.
Additionally, at September 30, 2024 and 2023, the undrawn amounts of home equity lines of credit totaled $5.22 billion and $4.70 billion, respectively. A bridge loan permits a borrower to utilize the existing equity in their current home to fund the purchase of a new home before the current home is sold.
As of September 30, 2023, outstanding borrowings (including accrued interest) from the FHLB of Cincinnati were $5.27 billion and the Association was in compliance with the stock investment requirement. Other Regulations Interest and other charges collected or contracted for by the Association are subject to state usury laws and federal laws concerning interest rates.
As of September 30, 2024, outstanding borrowings (including accrued interest) from the FHLB of Cincinnati were $4.79 billion and the Association was in compliance with the stock investment requirement. Other Regulations Interest and other charges collected or contracted for by the Association are subject to state usury laws and federal laws concerning interest rates.
As a result of the 2022, 2021, and 2020 approvals, Third Federal Savings, MHC previously waived its right to receive an aggregate of $1.13 per share on common stock for the period ended June 30, 2023, $1.13 per share for the period ended June 30, 2022, and $1.12 per share for the period ended June 30, 2021. Liquidity.
As a result of the 2023, 2022, and 2021 approvals, Third Federal Savings, MHC previously waived its right to receive an aggregate of $1.13 per share on common stock for the periods ended June 30, 2024, June 30, 2023 and June 30, 2022. Liquidity.
The Association’s revenues are derived primarily from interest on loans and, to a lesser extent, 5 Table of Contents interest on interest-earning deposits in other financial institutions, deposits maintained at the FRS, federal funds sold, investment securities, including mortgage-backed securities and dividends from FHLB of Cincinnati stock. The Association also generates revenues from fees and service charges.
The Association’s revenues are derived primarily from interest on loans and, to a lesser 5 Table of Contents extent, interest on interest-earning deposits in other financial institutions, deposits maintained at the FRS, federal funds sold, investment securities, including mortgage-backed securities and dividends from FHLB of Cincinnati stock.
Our analysis for evaluating the adequacy of and the appropriateness of our allowance for credit losses is continually refined as relevant information, relating to past events, current conditions and supportable forecasts become available. During the years ended September 30, 2023 and 2022, no material changes were made to the allowance for credit losses.
Our analysis for evaluating the adequacy of and the appropriateness of our allowance for credit losses is continually refined as relevant information, relating to past events, current conditions and supportable forecasts become available. During the years ended September 30, 2024 and 2023, no material changes were made to the allowance for credit losses other than the adoption of ASU 2022-02.
(2) No new originations of Home Today loans since fiscal 2016. Loan Portfolio Maturities. The following table summarizes the scheduled repayments of principal balances in the loan portfolio at September 30, 2023, according to each loan's final due date.
(2) No new originations of Home Today loans since fiscal 2016. Loan Portfolio Maturities. The following table summarizes the scheduled repayments of principal balances in the loans held for investment portfolio at September 30, 2024, according to each loan's final due date.
The Association maintains a liquid asset portfolio comprised of agency securities that are collateralized by mortgages, in addition to cash and cash equivalents, to maintain sufficient liquidity to fund business operations. Community Reinvestment Act and Fair Lending Laws.
The Association maintains a liquid asset portfolio comprised of federal agency and enterprise securities that are collateralized by mortgage loans, in addition to cash and cash equivalents, to maintain sufficient liquidity to fund business operations. Community Reinvestment Act and Fair Lending Laws.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+35 added−21 removed106 unchanged
Biggest changeWe originate our loans with a focus on limiting credit risk exposure and not necessarily to generate the highest return possible or maximize our interest rate spread. In addition, residential real estate mortgage loans generally have lower interest rates than commercial business loans, commercial real estate loans and consumer loans.
Biggest changeOur principal lending activity consists of originating, and essentially all of our loan portfolio consists of, residential real estate mortgage loans. We originate our loans with a focus on limiting credit risk exposure and not necessarily to generate the highest return possible or maximize our interest rate spread.
Each aspect of amplified supervision and regulation will in all likelihood increase our costs, may be accompanied by the risk of unexpected fines, sanctions, penalties, litigation and corresponding management diversion and may limit our ability to pursue business opportunities and return capital to our shareholders. • Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select, manage, and underwrite our customers become less predictive of future behaviors. • The processes we use to estimate losses inherent in our credit exposure require difficult, subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers to repay their loans, which may no longer be capable of viable estimation and which may, in turn, impact the reliability of our evaluation processes, the comfort of our regulators with respect to the adequacy of our allowance for credit losses and who may require adjustments thereto, and ultimately could result in increased provisions for loan losses and reduced levels of earnings and capital. • Our ability to engage in sales of mortgage loans to third parties (including mortgage loan securitization transactions with governmental entities) on favorable terms or at all could be adversely affected by further disruptions in the capital markets or other events, including deteriorating investor expectations. • Competition in our industry could intensify as a result of increasing consolidation of financial services companies in connection with current market conditions.
Each aspect of amplified supervision and regulation will in all likelihood increase our costs, may be accompanied by the risk of unexpected fines, sanctions, penalties, litigation and corresponding management diversion and may limit our ability to pursue business opportunities and return capital to our shareholders. • Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select, manage, and underwrite our customers becomes less predictive of future behaviors. • The process we use to estimate losses inherent in our credit exposure require difficult, subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers to repay their loans, which may no longer be capable of viable estimation and which may, in turn, impact the reliability of our evaluation processes, the comfort of our regulators with respect to the adequacy of our allowance for credit losses and who may require adjustments thereto, and ultimately could result in increased provisions for loan losses and reduced levels of earnings and capital. • Our ability to engage in sales of mortgage loans to third parties (including mortgage loan securitization transactions with governmental entities) on favorable terms or at all could be adversely affected by further disruptions in the capital markets or other events, including deteriorating investor expectations. • Competition in our industry could intensify as a result of increasing consolidation of financial services companies in connection with current market conditions.
Alternatively, we may need to sell a portion or our investment and/or loan portfolio in order to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators.
Alternatively, we may need to sell a portion of our investment and/or loan portfolio in order to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. A lack of liquidity could also attract increased regulatory scrutiny and potential constraints imposed on us by regulators.
A federal government shutdown could also result in reduced income for government employees or 44 Table of Contents employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services. Item 1B. Unresolved Staff Comments None.
A federal government shutdown could also result in reduced income for government employees or employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services. 43 Table of Contents Item 1B. Unresolved Staff Comments None.
While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return trade-off.
While we emphasize low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return trade-off.
The Association has a standing Technology Steering Committee, consisting of several senior managers (CFO, CIO, CSO, CXO, and CRO/ISO). The Committee meets quarterly, or more frequently if needed, and reports to the Board of Directors after each meeting through Committee minutes. The Association also engages outside consultants to support its cybersecurity efforts.
The Association has a standing Technology Steering Committee, consisting of several senior managers (CAO, CIO, CSO, CXO, and ISO). The Committee meets quarterly, or more frequently if needed, and reports to the Board of Directors after each meeting through Committee minutes. The Association also engages outside consultants to support its cybersecurity efforts.
We also may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Risks Related to Our Operations 40 Table of Contents Cyber-attacks, other security breaches or failure or interruption of information systems could adversely affect our operations, net income or reputation.
We also may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Risks Related to Our Operations Cyber-attacks, other security breaches or failure or interruption of information systems could adversely affect our operations, net income or reputation.
Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf, our policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit us to confirm the third party’s compliance with the terms of the agreement.
Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf, our policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit us to confirm the third party’s 39 Table of Contents compliance with the terms of the agreement.
In general, changes in market and competitive interest rates result from events that we do not control and over which we generally have little or no influence. As a result, mitigation of the adverse effects of changing interest rates is generally limited to controlling the composition of the assets and liabilities that we hold.
In general, changes in market and competitive interest rates result from events that we do not control and over which we generally have little or no influence. As a result, mitigation of the adverse effects of changing interest rates is generally limited 35 Table of Contents to controlling the composition of the assets and liabilities that we hold.
Negative conditions, such as layoffs, in the markets where collateral for a mortgage loan is located could adversely affect a borrower’s ability to repay the loan and the value of the collateral securing the loan.
Negative conditions, such as layoffs, in the markets where collateral for a mortgage loan is located could adversely affect a borrower's ability to repay the loan or the value of the collateral securing the loan.
Declines in the U.S. housing market, falling home prices and increasing foreclosures, as well as unemployment and under-employment, all negatively impact the credit performance of mortgage loans and can result in significant write-downs of asset values by financial institutions.
Declines in the U.S. housing market, falling home prices and increasing foreclosures, as well as unemployment and underemployment, all negatively impact the credit performance of mortgage loans and can result in significant write-downs of asset values by financial institutions.
Moreover, our ability to pay dividends, and the amount of such dividends, is affected by the ability of Third Federal Savings, MHC, our mutual holding company, to waive the receipt of dividends declared by the Company. Federal regulations require Third Federal Savings, MHC, to notify the FRS of any proposed waiver of its receipt of dividends from the Company.
Moreover, our ability to pay dividends, and the amount of such dividends, is affected by the ability of Third Federal Savings, MHC, our mutual holding company, to waive the receipt of dividends declared by the Company. 41 Table of Contents Federal regulations require Third Federal Savings, MHC, to notify the FRS of any proposed waiver of its receipt of dividends from the Company.
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates.
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional 40 Table of Contents funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates.
The value of the Company’s common stock is significantly affected by our ability to pay dividends to our public stockholders. The Company’s ability to pay dividends to our stockholders is subject to the availability of cash at the Company, 42 Table of Contents which is dependent on the Association having sufficient earnings to make capital distributions to the Company.
The value of the Company’s common stock is significantly affected by our ability to pay dividends to our public stockholders. The Company’s ability to pay dividends to our stockholders is subject to the availability of cash at the Company, which is dependent on the Association having sufficient earnings to make capital distributions to the Company.
These, and other negative effects of future hurricanes or tropical storms may adversely affect our business or results of operations. We are subject to environmental liability risk associated with lending activities or properties we own.
These, and other negative effects of future hurricanes or tropical storms may adversely affect our business or results of operations. 42 Table of Contents We are subject to environmental liability risk associated with lending activities or properties we own.
Third Federal Savings, MHC, has received the approval of its members in 10 separate meetings (held in either July or August of each year from 2014 through 2023) to waive the receipt of dividends for a twelve-month period, and the FRS has “non-objected” to Third Federal Savings, MHC’s waiver each time.
Third Federal Savings, MHC, has received the approval of its members in 11 separate meetings (held in either July or August of each year from 2014 through 2024) to waive the receipt of dividends for a twelve-month period, and the FRS has “non-objected” to Third Federal Savings, MHC’s waiver each time.
We cannot predict whether or to what extent damage caused by future hurricanes or tropical storms will affect our operations or the economy in our market area, but such 43 Table of Contents weather events could result in fewer loan originations and greater delinquencies, foreclosures or loan losses.
We cannot predict whether or to what extent damage caused by future hurricanes or tropical storms will affect our operations or the economy in our market area, but such weather events could result in fewer loan originations and greater delinquencies, foreclosures or loan losses.
We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject to, including credit, liquidity, operational, regulatory compliance and reputational.
We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject to, including credit, liquidity, operational, information technology, regulatory compliance, reputational and strategic.
Our operations rely on numerous external vendors. We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the 41 Table of Contents contracted arrangements under service level agreements.
Our operations rely on numerous external vendors. We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
At September 30, 2023, we held $2.70 billion of home equity lines of credit loans and $2.61 billion of interest-bearing checking and savings deposits. Our net income can also be reduced by the impact that changes in interest rates can have on the value of our capitalized mortgage servicing rights.
At September 30, 2024, we held $3.32 billion of home equity lines of credit loans and $2.00 billion of interest-bearing checking and savings deposits. Our net income can also be reduced by the impact that changes in interest rates can have on the value of our capitalized mortgage servicing rights.
In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability.
New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability.
The directors of the Association do not have significant experience in cybersecurity risk management in other business entities comparable to the Association and rely on the Information Security Officer (ISO) and Chief Information Officer (CIO) for cybersecurity guidance. Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.
The directors of the Association have limited experience in cybersecurity risk management in other business entities comparable to the Association and rely on the ISO and CIO for cybersecurity guidance. Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.
Our calculations further 37 Table of Contents project that, at September 30, 2023, in the event that market interest rates used in the simulation were adjusted in equal monthly amounts (termed a "ramped" format) during the twelve month measurement period to an aggregate increase in 200 basis points, we would expect our projected net interest income for the twelve months ended September 30, 2024 to decrease by 2.71%.
Our calculations further project that, at September 30, 2024, in the event that market interest rates used in the simulation were adjusted in equal monthly amounts (termed a "ramped" format) during the twelve month measurement period to an aggregate increase in 200 basis points, we would expect our projected net interest income for the twelve months ended September 30, 2025, to increase by 1.27%.
The simulation model uses a discounted cash flow analysis and an option-based pricing approach in measuring the interest rate sensitivity of EVE. At September 30, 2023, in the event of an immediate 200 basis point increase in all interest rates, our model projects that we would experience a $324.7 million, or 31.45%, decrease in EVE.
The simulation model uses a discounted cash flow analysis and an option-based pricing approach in measuring the interest rate sensitivity of EVE. At September 30, 2024, in the event of an immediate 200 basis point increase in all interest rates, our model projects that we would experience a $311.5 million, or 27.24%, decrease in EVE.
A prolonged period of secondary market illiquidity could have a material adverse effect on our financial condition and results of operations. If we are required to repurchase mortgage loans that we have previously sold, it would negatively affect our earnings.
These conditions may fluctuate or worsen in the future. A prolonged period of secondary market illiquidity could have a material adverse effect on our financial condition and results of operations. If we are required to repurchase mortgage loans that we have previously sold, it would negatively affect our earnings.
As of September 30, 2023, we serviced $1.93 billion of loans sold to third parties, and the mortgage servicing rights associated with such loans had an amortized cost of $7.4 million and an estimated fair value, at that date, of $15.9 million.
As of September 30, 2024, we serviced $1.97 billion of loans sold to third parties, and the mortgage servicing rights associated with such loans had an amortized cost of $7.6 million and an estimated fair value, at that date, of $17.1 million.
As a result, we may generate lower interest rate spreads and rates of return when compared to our competitors who originate more consumer or commercial loans than we do.
In addition, residential real estate mortgage loans generally have lower interest rates than commercial business loans, commercial real estate loans and consumer loans. As a result, we may generate lower interest rate spreads and rates of return when compared to our competitors who originate more consumer or commercial loans than we do.
Inflation can have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Inflation can have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. From 2022 to 2023, the FRS raised certain benchmark interest rates in an effort to combat elevated inflation,.
Risk Related to Our Corporate Structure Our sources of funds are limited because of our holding company structure. The Company is a separate legal entity from its subsidiaries and does not have significant operations of its own. Dividends from the Association provide a significant source of cash for the Company.
Any such losses could materially and adversely affect our results of operations. Risk Related to Our Corporate Structure Our sources of funds are limited because of our holding company structure. The Company is a separate legal entity from its subsidiaries and does not have significant operations of its own.
Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.
Our net income largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. The reversal of the historically low interest rate environment may further adversely affect our net interest income and profitability.
Furthermore, our customers are also affected by inflation, higher interest rates, and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. Risks Related to Market Interest Rates Future changes in interest rates could reduce our net income.
See Item 7A. Quantitative and Qualitative Disclosures about Market Risk . A worsening of economic conditions could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could have an adverse effect on our results of operations.
See also, “Forward-Looking Statements.” Risks Related to Economic Conditions A worsening of economic conditions could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could have an adverse effect on our results of operations.
The availability of dividends from the Association is limited by various statutes and regulations.
Dividends from the Association provide a significant source of cash for the Company. The availability of dividends from the Association is limited by various statutes and regulations.
Material additions to our allowance would materially decrease our net income. See Note 5. LOANS AND ALLOWANCES FOR CREDIT LOSSES for additional information on the CECL methodology. In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may decide to increase our provision for loans losses or recognize further loan charge-offs.
In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may decide to increase our provision for loans losses or recognize further loan charge-offs.
Bank regulatory agencies, such as the FRS, the OCC, the CFPB and the FDIC, govern the activities in 38 Table of Contents which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors.
Bank regulatory agencies, such as the FRS, the OCC, the CFPB and the FDIC, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.
Each of these alternatives can have an unfavorable impact on us. Changes in interest rates can also have an unfavorable impact on our net interest income if mortgage interest rates decline. Our customers may seek to refinance, without penalty, their mortgage loans with us or repay their mortgage loans with us and borrow from another lender.
Each of these alternatives can have an unfavorable impact on us. Changes in interest rates can also have an unfavorable impact on our net interest income when and if home equity lines of credit and loans and mortgage interest rates decline.
Any increase in our allowance for credit losses or loan charge-offs as a result of such review or otherwise, may have a material adverse effect on our financial condition and results of operation. Risks Related to Competitive Matters Strong competition within our market areas may limit our growth and profitability. Competition in the banking and financial services industry is intense.
Any increase in our allowance for credit losses or loan charge-offs as a result of such review or otherwise, may have a material adverse effect on our financial condition and results of operation. The foreclosure process may adversely impact our recoveries on non-performing loans.
In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential real estate loans and increased investor yield requirements for these loans. These conditions may fluctuate or worsen in the future.
Secondary mortgage market conditions could have a material impact on our financial condition and results of operations. Loan sales provide a portion of our non-interest income. In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential real estate loans and increased investor yield requirements for these loans.
In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expense.
As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non- 34 Table of Contents interest expense.
Removed
See also, “Forward-Looking Statements.” Risks Related to Economic Conditions Our financial condition, results of operation, and stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
Added
Our customers may seek to refinance, without penalty, their mortgage loans with us or repay their mortgage loans with us and borrow from another lender.
Removed
Further, if we are unable to adequately manage our liquidity, deposits, capital levels, and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operations.
Added
See Item 7A. Quantitative and Qualitative Disclosures about Market Risk . Hedging against interest rate risk exposure may adversely affect our earnings. On occasion we have employed various financial risk methodologies that limit, or "hedge," the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities.
Removed
On March 8, 2023, Silvergate Bank, La Jolla, CA, announced its decision to voluntarily liquidate its assets and wind down operations.
Added
We also engage in hedging strategies with respect to arrangements where our customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions.
Removed
On March 10, 2023, Silicon Valley Bank, Santa Clara, CA, was closed by the California Department of Financial Protection and Innovation, and on March 12, 2023, Signature Bank, New York, NY, was closed by the New York State Department of Financial Services.
Added
There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Moreover, hedging activities could result in losses if the event against which we hedge does not occur.
Removed
Additionally, on May 1, 2023, First Republic Bank, San Francisco, CA, was closed by the FDIC and sold to JP Morgan Chase & Co. These events led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
Added
Additionally, interest rate hedging could fail to protect us or adversely affect us because, among other things: • available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; • the durations of the hedge may not match the duration of the related liability; • the party owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and/or • downward adjustments, or "mark-to-market" losses, would reduce our equity.
Removed
Notably, the liquidation of Silvergate Bank and the failures of Silicon Valley Bank and Signature Bank were not generally related to the credit quality of their assets, but to poor liquidity management, mismatched funding of long-term assets with short-term funds, and unique business models.
Added
We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares. Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define "capital" for calculating these ratios.
Removed
The financial distress these banks experienced appears to have been caused in large part by high exposure to certain industries, including cryptocurrency and venture capital and start-up companies operating in the technology space, which have experienced significant volatility and fluctuations in cash flows over the past several years.
Added
The minimum capital requirements are: (1) a common equity Tier 1 capital ratio of 4.5%; (2) a Tier 1 risk-based assets capital ratio of 6%; (3) a total capital ratio of 8%; and 36 Table of Contents (4) a Tier 1 leverage ratio of 4%.
Removed
These banks also had high levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. Silicon Valley Bank in particular appears to have experienced a severe lack of liquidity, forcing it to sell long-term investment securities at significant losses.
Added
The regulations also establish a "capital conservation buffer" of 2.5%, which results in the following minimum ratios: (1) a common equity Tier 1 capital ratio of 7.0%; (2) a Tier 1 to risk-based assets capital ratio of 8.5%; and (3) a total capital ratio of 10.5%.
Removed
Ultimately, it was unable to meet its financial commitments and satisfy the cash requirements of its customers.
Added
An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the capital conservation buffer amount. The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements.
Removed
These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions, which in turn led to a greater focus by institutions, investors, and regulators on the on-balance sheet liquidity of and funding sources for financial institutions and the composition of its deposits.
Added
Specifically, our ability to pay dividends to the Company is limited for any association that does not maintain the capital conservation buffer required by the capital rules, which may limit our ability to pay dividends to our stockholders.
Removed
Notwithstanding, our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention, and other related matters, our financial condition, results of operation, and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events.
Added
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. We may be required to raise additional capital in the future, but that capital may not be available when it is needed, or it may only be available on unacceptable terms, which could adversely affect our financial condition and results of operations.
Removed
Recently, there has been a rise in inflation and the Federal Reserve Board has raised certain benchmark interest rates in an effort to combat inflation. As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.
Added
We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We may at some point, however, need to raise additional capital to support continued growth or be required by our regulators to increase our capital resources.
Removed
The Federal Reserve Board decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic. The Federal Reserve Board is reversing its policy of near zero interest rates given its concerns over inflation. Market interest rates have risen in response to the Federal Reserve Board's recent rate increases.
Added
Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial performance. Accordingly, we may not be able to raise additional capital, if needed, on terms acceptable to us.
Removed
The increase in market interest rates has had and, as discussed below, is expected to continue to have an adverse effect on our net interest income and profitability.
Added
If we cannot raise additional capital when needed, our ability to further expand our operations and pursue our growth strategy could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action.
Removed
Future changes in interest rates could reduce our net income. 36 Table of Contents Our net income largely depends on our net interest income, which could be negatively affected by changes in interest rates.
Added
We may become subject to enforcement actions even though noncompliance was inadvertent or unintentional.
Removed
We received a “Needs to Improve” Community Reinvestment Act rating in our most recent federal examination. This could, at a minimum, result in denial of certain corporate applications such as those related to branches, mergers, minority stock offerings or a second-step conversion.
Added
The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, BSA and OFAC regulations, and economic sanctions against certain foreign countries and nations.
Removed
All savings associations have a responsibility under the Community Reinvestment Act and federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a federal savings association, the OCC is required to assess the savings association’s record of compliance with the Community Reinvestment Act.
Added
Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.
Removed
The Association received a “Needs to Improve” Community Reinvestment Act rating in its most recent federal examination that analyzed home mortgage lending data for the period January 1, 2015 through December 31, 2019.
Added
We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations; however, some legal/regulatory frameworks provide for the imposition of fines and penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance.
Removed
A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as those related to branches, mergers, minority stock offerings or a second-step conversion, or in restrictions on its activities.
Added
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on our business. 37 Table of Contents Risks Related to our Lending Activities Our lending activities provide lower interest rate returns than financial institutions that originate more commercial loans.
Removed
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. Risks Related to our Lending Activities Our lending activities provide lower interest rates than financial institutions that originate more commercial loans. Our principal lending activity consists of originating, and essentially all of our loan portfolio consists of, residential real estate mortgage loans.
Added
We intend to continue our focus on residential real estate lending. Our business may be adversely affected by credit risk associated with residential property. A significant portion of our total residential mortgage loan portfolio is secured by one- to four-family real estate.
Removed
We intend to continue our focus on residential real estate lending. 39 Table of Contents Secondary mortgage market conditions could have a material impact on our financial condition and results of operations. Loan sales provide a significant portion of our non-interest income.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed1 unchanged
Biggest changeThe net book value of our land, premises, equipment and software was $34.7 million at September 30, 2023, a $177 thousand increase from September 30, 2022 due to a $2.0 million increase in DP equipment and a $479 thousand increase in building improvements. These increases were primarily offset by depreciation.
Biggest changeThe net book value of our land, premises, equipment and software was $33.2 million at September 30, 2024, a $1.5 million decrease from September 30, 2023. 44 Table of Contents Depreciation was partially offset by a $1.1 million increase in DP Equipment and a $1.5 million increase in Leasehold Improvements.
Our branch offices are located in the Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit and in the Florida counties of Broward, Collier, Hillsborough, Lee, Palm Beach, Pasco, Pinellas and Sarasota. Our loan production offices are located in the Ohio counties of Butler, Delaware and Hamilton.
Our branch offices are located in the Ohio counties of Cuyahoga, Lake, Lorain, Medina and Summit and in the Florida counties of Broward, Collier, Hillsborough, Lee, Palm Beach, Pasco, Pinellas and Sarasota. Our loan production offices are located in the Ohio counties of Butler and Delaware.
Item 2. Properties We operate from our main office in Cleveland, Ohio, our 37 full-service branch offices located in Ohio and Florida and our four loan production offices located in Ohio.
Item 2. Properties We operate from our main office in Cleveland, Ohio, our 37 full-service branch offices located in Ohio and Florida and our two loan production offices located in Ohio.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+0 added−2 removed3 unchanged
Biggest changeAt a special meeting of members of Third Federal Savings, MHC, the members (depositors and certain loan customers of the Association) voted to approve Third Federal Savings, MHC's proposed waiver of dividends aggregating up to $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 11, 2023.
Biggest changeAt the July 9, 2024 special meeting of members of Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company of TFS Financial Corporation (the "Company"), the members of the MHC (depositors and certain loan customers of Third Federal Savings and Loan Association of Cleveland) voted to approve the MHC's proposed waiver of dividends, aggregating up to $1.13 per share to be declared on the Company's common stock during the twelve months subsequent to the members' approval (i.e., through July 9, 2025).
We did not purchase any stock during the quarter ended September 30, 2023. On October 27, 2016, the Company announced that the Board of Directors approved the Company's eighth stock repurchase program, which authorizes the repurchase of up to 10,000,000 shares of the Company's outstanding common stock.
We did not repurchase any shares of our common stock during the quarter ended September 30, 2024. On October 27, 2016, the Company announced that the Board of Directors approved the Company's eighth stock repurchase program, which authorizes the repurchase of up to 10,000,000 shares of the Company's outstanding common stock.
Following the receipt of the members’ approval at the July 11, 2023 special meeting, Third Federal Savings, MHC filed a notice with, and subsequently received the non-objection of, the FRB-Cleveland for the proposed dividend waivers. 45 Table of Contents In the table and graph that follow, we have provided summary information regarding the performance of the cumulative total return of our common stock from September 30, 2018 through September 30, 2023, relative to the cumulative total return on stocks included in the S&P U.S.
Following the receipt of the members’ approval at the July 9, 2024, special meeting, Third Federal Savings, MHC filed a notice with, and subsequently received the non-objection from the FRB-Cleveland for the proposed dividend waiver. 45 Table of Contents In the table and graph that follow, we have provided summary information regarding the performance of the cumulative total return of our common stock from September 30, 2019 through September 30, 2024, relative to the cumulative total return on stocks included in the S&P U.S.
As of November 14, 2023, we had 6,044 shareholders of record, which does not include persons or entities holding shares in “nominee” or “street” name through brokerage firms. Through September 30, 2010, Third Federal Savings, MHC, waived its right to receive dividends. The waivers complied with regulatory authorizations (in the form of non-objection) obtained by Third Federal Savings, MHC.
As of November 15, 2024, we had 5,842 shareholders of record, which does not include persons or entities holding shares in “nominee” or “street” name through brokerage firms. Through September 30, 2010, Third Federal Savings, MHC, waived its right to receive dividends. The waivers complied with regulatory authorizations (in the form of non-objection) obtained by Third Federal Savings, MHC.
The members approved the waiver by casting 60% of the eligible votes, with 97% of the votes cast, or 58% of the total eligible votes, in favor of the waiver. Third Federal Savings, MHC is the 81% majority shareholder of the Company.
The members approved the waiver by casting 58% of the total eligible votes. Of the votes cast, 97% were in favor of the proposal. The MHC is the 81% majority shareholder of the Company.
Purchases under the program will be on an ongoing basis and subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses of capital, and our financial performance. Repurchased shares will be held as treasury stock and be available for general corporate use.
Purchases under the program will be subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses of capital, and our financial performance. Repurchased shares will be held as treasury stock and be available for general corporate use. There were no stock repurchases during the fiscal year ended September 30, 2024.
Measurement Date Index (with base price at 9/30/2018) 9/30/2018 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 TFS Financial Corporation 100.00 127.48 110.47 151.61 111.00 110.02 S&P U.S.
Measurement Date Index (with base price at 9/30/2019) 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 TFS Financial Corporation 100.00 86.66 118.93 87.08 86.31 102.49 S&P U.S.
In addition, interim final rules issued by the FRS in 2011 require that a majority of the mutual holding company's members eligible to vote must approve a dividend waiver by a mutual holding company within 12 months prior to the declaration of the dividend being waived.
Regulatory non-objection is subject to periodic regulatory review and no assurances can be given regarding future regulatory non-objection. In addition, a majority of the mutual holding company's members eligible to vote must approve a dividend waiver by a mutual holding company within 12 months prior to the declaration of the dividend being waived.
BMI Banks Index 100.00 100.32 73.65 134.01 102.95 99.73 KBW NASDAQ Bank Index 100.00 98.25 74.43 136.50 103.11 87.45 NASDAQ Composite Index 100.00 100.52 141.70 184.58 136.12 171.65 Source: S&P Global Market Intelligence We did not sell any equity securities during the fiscal year ended September 30, 2023.
BMI Banks Index 100.00 73.42 133.58 102.63 99.42 146.57 KBW NASDAQ Bank Index 100.00 75.76 138.93 104.94 89.01 134.92 NASDAQ Composite Index 100.00 140.96 183.61 135.41 170.76 236.74 Source: S&P Global Market Intelligence We did not sell any unregistered equity securities during the fiscal year ended September 30, 2024.
For the fiscal year ended September 30, 2023, stock repurchases totaled 361,869 shares at an average price per share of $13.82. The program has 5,191,951 shares yet to be purchased as of September 30, 2023. The program has no expiration date. 46 Table of Contents Item 6. [Reserved]
The program has 5,191,951 shares yet to be purchased as of September 30, 2024. The program has no expiration date.
Removed
Regulatory non-objection is subject to periodic regulatory review and no assurances can be given regarding future regulatory non-objection.
Removed
There can be no assurance that a final rule will not require such a member vote.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAt September 30, 2023 2022 2021 2020 2019 (In thousands) Selected Financial Condition Data: Total assets $ 16,917,979 $ 15,789,879 $ 14,057,450 $ 14,642,221 $ 14,542,356 Cash and cash equivalents 466,746 369,564 488,326 498,033 275,143 Investment securities - available for sale 508,324 457,908 421,783 453,438 547,864 Loans held for sale 3,260 9,661 8,848 36,871 3,666 Loans, net 15,165,747 14,257,067 12,509,035 13,103,062 13,195,745 Bank owned life insurance 312,072 304,040 297,332 222,919 217,481 Prepaid expenses and other assets 117,270 95,428 91,586 104,832 87,957 Deposits 9,449,820 8,921,017 8,993,605 9,225,554 8,766,384 Borrowed funds 5,273,637 4,793,221 3,091,815 3,521,745 3,902,981 Shareholders’ equity 1,927,361 1,844,339 1,732,280 1,671,853 1,696,754 47 Table of Contents For the Years Ended September 30, 2023 2022 2021 2020 2019 (In thousands, except per share amounts) Selected Operating Data: Interest income $ 611,919 $ 409,333 $ 389,351 $ 455,298 $ 482,087 Interest expense 328,352 141,937 157,721 213,030 216,666 Net interest income 283,567 267,396 231,630 242,268 265,421 Provision (release) for credit losses on loans (1,500) 1,000 (9,000) 3,000 (10,000) Net interest income after provision (release) for credit losses on loans 285,067 266,396 240,630 239,268 275,421 Non-interest income 21,429 23,804 55,299 53,251 20,464 Non-interest expenses 213,129 198,146 195,835 192,274 193,673 Earnings before income tax 93,367 92,054 100,094 100,245 102,212 Income tax expense 18,117 17,489 19,087 16,928 21,975 Net earnings after income tax expense $ 75,250 $ 74,565 $ 81,007 $ 83,317 $ 80,237 Earnings per share Basic $ 0.27 $ 0.26 $ 0.29 $ 0.30 $ 0.29 Diluted $ 0.26 $ 0.26 $ 0.29 $ 0.29 $ 0.28 Cash dividends declared per share $ 1.13 $ 1.13 $ 1.12 $ 1.11 $ 1.02 48 Table of Contents At or For The Years Ended September 30, 2023 2022 2021 2020 2019 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets 0.46 % 0.51 % 0.56 % 0.56 % 0.56 % Return on average equity 4.00 % 4.14 % 4.77 % 4.88 % 4.58 % Interest rate spread(1) 1.57 % 1.75 % 1.52 % 1.52 % 1.73 % Net interest margin(2) 1.80 % 1.88 % 1.66 % 1.69 % 1.92 % Efficiency ratio(3) 69.88 % 68.04 % 68.25 % 65.06 % 67.75 % Non-interest expense to average total assets 1.31 % 1.34 % 1.35 % 1.29 % 1.36 % Average interest-earning assets to average interest-bearing liabilities 111.36 % 112.42 % 111.92 % 111.41 % 112.28 % Asset Quality Ratios: Non-performing assets as a percent of total assets 0.20 % 0.23 % 0.32 % 0.37 % 0.50 % Non-accruing loans as a percent of total loans 0.21 % 0.25 % 0.35 % 0.41 % 0.54 % Allowance for credit losses on loans as a percent of non-accruing loans 242.26 % 204.73 % 145.96 % 87.95 % 54.60 % Allowance for credit losses on loans as a percent of total loans 0.51 % 0.51 % 0.51 % 0.36 % 0.29 % Capital Ratios: Association Total capital to risk-weighted assets(4) 17.87 % 18.84 % 21.00 % 19.96 % 19.56 % Tier 1 (leverage) capital to net average assets(4) 9.82 % 10.33 % 11.15 % 10.39 % 10.54 % Tier 1 capital to risk-weighted assets(4) 17.15 % 18.25 % 20.43 % 19.37 % 19.07 % Common equity tier 1 capital to risk-weighted assets(4) 17.15 % 18.25 % 20.43 % 19.37 % 19.07 % TFS Financial Corporation Total capital to risk-weighted assets(4) 19.85 % 21.18 % 23.75 % 22.71 % 22.22 % Tier 1 (leverage) capital to net average assets(4) 10.96 % 11.66 % 12.65 % 11.88 % 12.05 % Tier 1 capital to risk-weighted assets(4) 19.13 % 20.59 % 23.18 % 22.13 % 21.73 % Common equity tier 1 capital to risk-weighted assets(4) 19.13 % 20.59 % 23.18 % 22.13 % 21.73 % Average equity to average total assets 11.58 % 12.23 % 11.72 % 11.50 % 12.30 % Other Data: Association: Number of full service offices 37 37 37 37 37 Loan production offices 4 5 7 7 8 ______________________ (1) Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year.
Biggest changeAt September 30, 2024 2023 2022 2021 2020 Selected Financial Condition Data: (In thousands) Total assets $ 17,090,785 $ 16,917,979 $ 15,789,879 $ 14,057,450 $ 14,642,221 Cash and cash equivalents 463,718 466,746 369,564 488,326 498,033 Investment securities available for sale 526,251 508,324 457,908 421,783 453,438 Mortgage loans held for sale 17,775 3,260 9,661 8,848 36,871 Loans held for investment, net 15,322,059 15,165,747 14,257,067 12,509,035 13,103,062 Bank owned life insurance contracts 317,977 312,072 304,040 297,332 222,919 Other assets 114,125 117,270 95,428 91,586 104,832 Deposits 10,195,079 9,449,820 8,921,017 8,993,605 9,225,554 Borrowed funds 4,792,847 5,273,637 4,793,221 3,091,815 3,521,745 Shareholders’ equity 1,862,624 1,927,361 1,844,339 1,732,280 1,671,853 47 Table of Contents For the Years Ended September 30, 2024 2023 2022 2021 2020 Selected Operating Data: (In thousands, except per share amounts) Interest and dividend income $ 734,074 $ 611,919 $ 409,333 $ 389,351 $ 455,298 Interest expense 455,616 328,352 141,937 157,721 213,030 Net interest income 278,458 283,567 267,396 231,630 242,268 Provision (release) for credit losses (1,500) (1,500) 1,000 (9,000) 3,000 Net interest income after provision (release) for credit losses 279,958 285,067 266,396 240,630 239,268 Non-interest income 24,702 21,429 23,804 55,299 53,251 Non-interest expenses 204,347 213,129 198,146 195,835 192,274 Income before income taxes 100,313 93,367 92,054 100,094 100,245 Income tax expense 20,725 18,117 17,489 19,087 16,928 Net income $ 79,588 $ 75,250 $ 74,565 $ 81,007 $ 83,317 Earnings per share Basic $ 0.28 $ 0.27 $ 0.26 $ 0.29 $ 0.30 Diluted $ 0.28 $ 0.26 $ 0.26 $ 0.29 $ 0.29 Cash dividends declared per share $ 1.13 $ 1.13 $ 1.13 $ 1.12 $ 1.11 48 Table of Contents At or For The Years Ended September 30, 2024 2023 2022 2021 2020 Selected Financial Ratios and Other Data: Performance Ratios: Return on average total assets 0.47 % 0.46 % 0.51 % 0.56 % 0.56 % Return on average equity 4.12 % 4.00 % 4.14 % 4.77 % 4.88 % Interest rate spread(1) 1.38 % 1.57 % 1.75 % 1.52 % 1.52 % Net interest margin(2) 1.69 % 1.80 % 1.88 % 1.66 % 1.69 % Efficiency ratio(3) 67.41 % 69.88 % 68.04 % 68.25 % 65.06 % Non-interest expense to average total assets 1.20 % 1.31 % 1.34 % 1.35 % 1.29 % Average interest-earning assets to average interest-bearing liabilities 111.07 % 111.36 % 112.42 % 111.92 % 111.41 % Asset Quality Ratios: Non-performing assets as a percent of total assets 0.20 % 0.20 % 0.23 % 0.32 % 0.37 % Non-accruing loans as a percent of total loans 0.22 % 0.21 % 0.25 % 0.35 % 0.41 % Allowance for credit losses on loans as a percent of non-accruing loans 208.28 % 242.26 % 204.73 % 145.96 % 87.95 % Allowance for credit losses on loans as a percent of total loans 0.45 % 0.51 % 0.51 % 0.51 % 0.36 % Capital Ratios: Association Total capital to risk-weighted assets 17.91 % 17.87 % 18.84 % 21.00 % 19.96 % Tier 1 (leverage) capital to net average assets 10.11 % 9.82 % 10.33 % 11.15 % 10.39 % Tier 1 capital to risk-weighted assets 17.17 % 17.15 % 18.25 % 20.43 % 19.37 % Common equity tier 1 capital to risk-weighted assets 17.17 % 17.15 % 18.25 % 20.43 % 19.37 % TFS Financial Corporation Total capital to risk-weighted assets 19.24 % 19.85 % 21.18 % 23.75 % 22.71 % Tier 1 (leverage) capital to net average assets 10.89 % 10.96 % 11.66 % 12.65 % 11.88 % Tier 1 capital to risk-weighted assets 18.50 % 19.13 % 20.59 % 23.18 % 22.13 % Common equity tier 1 capital to risk-weighted assets 18.50 % 19.13 % 20.59 % 23.18 % 22.13 % Average equity to average total assets 11.33 % 11.58 % 12.23 % 11.72 % 11.50 % Other Data: Association: Number of full service offices 37 37 37 37 37 Loan production offices 2 4 5 7 7 ______________________ (1) Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the year.
As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC ("the MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive receipt of its share of each dividend paid. Refer to Item 5.
As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC, the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive receipt of its share of each dividend paid. Refer to Item 5.
Historically, our greatest risk has been our exposure to changes in interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates, and most notably rising interest rates.
Historically, our greatest risk has been our exposure to changes in market interest rates. When we hold longer-term, fixed-rate assets, funded by liabilities with shorter-term re-pricing characteristics, we are exposed to potentially adverse impacts from changing interest rates, and most notably rising interest rates.
If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, sales of investment securities, other deposit products, including new CDs, brokered CDs, FHLB advances, borrowings from the FRB-Cleveland Discount Window or other collateralized borrowings.
If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, sales of investment securities, other deposit products, including new CDs and brokered CDs, FHLB advances, borrowings from the FRB-Cleveland Discount Window or other collateralized borrowings.
No tax-equivalent yield adjustments were made, as the effects thereof were not material. Average balances are derived from daily average balances. Non-accrual loans are included in the computation of average balances, but only cash payments received on those loans during the period presented are reflected in the yield.
No tax-equivalent yield adjustments were made, as the effects thereof were not material. Average balances are derived from daily average balances. Non-accrual loans are included in the computation of loan average balances, but only cash payments received on those loans during the period presented are reflected in the yield.
Our analytic procedures and evaluations include specific reviews of all home equity loans and lines of credit that become 90 or more days past due, as well as specific reviews of all first mortgage loans that become 180 or more days past due.
Our analytic procedures and evaluations include specific reviews of all home equity loans and lines of credit that become 90 or more days past due, as well as collateral reviews of all first mortgage loans that become 180 or more days past due.
Currently, in addition to Ohio and Florida, we are actively lending in 23 other states and the District of Columbia, and as a result of that activity, the concentration ratios of the combined total of our residential Core and construction loans held for investment in Ohio and Florida have trended downward from their September 30, 2010 levels when the concentrations were 79.1% in Ohio and 19.0% in Florida.
Currently, in addition to Ohio and Florida, we are actively lending in 25 other states and the District of Columbia, and as a result of that activity, the concentration ratios of the combined total of our residential Core and construction loans held for investment in Ohio and Florida have trended downward from their September 30, 2010 levels when the concentrations were 79.1% in Ohio and 19.0% in Florida.
We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2023. We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, scheduled liability maturities and the objectives of our asset/liability management program.
We believe that we had sufficient sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2024. We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, scheduled liability maturities and the objectives of our asset/liability management program.
To mitigate our interest rate risk in general and to address the current rate environment specifically, we utilize a variety of strategies that include: • Maintaining regulatory capital in excess of levels required to be considered well capitalized; • Promoting adjustable-rate loans and shorter-term fixed-rate loans; • Marketing home equity lines of credit, which carry an adjustable rate of interest, indexed to the prime rate; • Opportunistically extending the duration of our funding sources; • Utilizing interest rate swaps to convert short-term FHLB advances and brokered certificates of deposit into long-term, fixed-rate borrowings; and • Selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.
To mitigate our interest rate risk in general and to address the current rate environment specifically, we utilize a variety of strategies that include: • Maintaining regulatory capital in excess of levels required to be considered well capitalized; • Maintaining adjustable-rate mortgage loan balances and shorter-term fixed-rate loans; • Marketing home equity lines of credit, which carry an adjustable rate of interest, indexed to the prime rate; • Opportunistically extending the duration of our funding sources; • Utilizing interest rate swaps to convert short-term FHLB advances and brokered certificates of deposit into long-term, fixed-rate borrowings; and • Selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.
The Company’s eighth stock repurchase program, which authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding common stock was approved by the Board of Directors on October 27, 2016, and repurchases began on January 6, 2017. There were 4,808,049 shares repurchased under that program between its start date and September 30, 2023.
The Company’s eighth stock repurchase program, which authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding common stock was approved by the Board of Directors on October 27, 2016, and repurchases began on January 6, 2017. There were 4,808,049 shares repurchased under that program between its start date and September 30, 2024.
Beginning this fiscal year, the Company entered into the final three years of the five-year transitional period, as provided by a final rule, after CECL was adopted in fiscal year 2021. Refer to the Liquidity and Capital Resources section of this Item 7 for additional discussion regarding regulatory capital requirements.
Beginning this fiscal year, the Company entered into the final two years of the five-year transitional period, as provided by a final rule, after CECL was adopted in fiscal year 2021. Refer to the Liquidity and Capital Resources section of this Item 7 for additional discussion regarding regulatory capital requirements.
Our primary sources of funds consist of deposit inflows, loan repayments, advances from the FHLB of Cincinnati, borrowings from the FRB-Cleveland 60 Table of Contents Discount Window, overnight Fed Funds through various arrangements with other institutions, proceeds from brokered CDs transactions, principal repayments and maturities of securities, and sales of loans.
Our primary sources of funds consist of deposit inflows, loan repayments, advances from the FHLB of Cincinnati, borrowings from the FRB-Cleveland 59 Table of Contents Discount Window, overnight Fed Funds through various arrangements with other institutions, proceeds from brokered CDs transactions, principal repayments and maturities of securities, and sales of loans.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the CDs due on or before September 30, 2024. We believe, however, based on past experience, that a significant portion of such deposits will remain with us.
Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the CDs due on or before September 30, 2025. We believe, however, based on past experience, that a significant portion of such deposits will remain with us.
For a comparison of operating results for the fiscal years ended September 30, 2022 and 2021, see the Company's Form 10-K for the fiscal year ended September 30, 2022. Liquidity and Capital Resources Liquidity is the ability to meet current and future financial obligations of a short-term nature.
For a comparison of operating results for the fiscal years ended September 30, 2023 and 2022, see the Company's Form 10-K for the fiscal year ended September 30, 2023. Liquidity and Capital Resources Liquidity is the ability to meet current and future financial obligations of a short-term nature.
The amount of dividends that the Association may declare and pay to the Company in any calendar year, without the receipt of prior approval from the OCC but with prior notice to the FRB-Cleveland, cannot 62 Table of Contents exceed net income for the current calendar year-to-date period plus retained net income (as defined) for the preceding two calendar years, reduced by prior dividend payments made during those periods.
The amount of dividends that the Association may declare and pay to the Company in any calendar year, without the receipt of prior approval from the OCC but with prior notice to the FRB-Cleveland, cannot exceed net income for the current calendar year-to-date period plus retained net income (as defined) for the preceding two calendar years, reduced by prior dividend payments made during those periods.
Promotion of Adjustable-Rate Loans and Shorter-Term, Fixed-Rate Loans We offer our "Smart Rate" adjustable-rate mortgage loan, which provides us with improved interest rate risk characteristics when compared to a 30-year, fixed-rate mortgage loan. We also offer a 10-year, fully amortizing fixed-rate, first mortgage loan.
Adjustable-Rate Loans and Shorter-Term, Fixed-Rate Loans We offer our "Smart Rate" adjustable-rate mortgage loan, which provides us with improved interest rate risk characteristics when compared to a 30-year, fixed-rate mortgage loan. We also offer a 10-year, fully amortizing fixed-rate, first mortgage loan.
(2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by total interest-earning assets. 58 Table of Contents Rate/Volume Analysis.
(2) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. 57 Table of Contents (3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by total interest-earning assets. Rate/Volume Analysis.
Each individual swap agreement has been designated as a cash flow hedge of interest rate risk associated with either the Company's variable rate borrowings from the FHLB of Cincinnati or brokered CD's.
Each individual swap agreement has been designated as a cash flow hedge of interest rate risk associated with either the Company's variable rate borrowings from the FHLB of Cincinnati or brokered CDs.
Recoveries of amounts charged against the allowance for credit losses occur when collateral values increase and homes are sold or when borrowers repay the amounts previously charged-off. For the fiscal year ended September 30, 2023, we recorded net recoveries of $6.4 million, as compared to net recoveries of $9.7 million for the year ended September 30, 2022.
Recoveries of amounts charged against the allowance for credit losses occur when collateral values increase and homes are sold or when borrowers repay the amounts previously charged-off. For the fiscal year ended September 30, 2024, we recorded net recoveries of $4.7 million, as compared to net recoveries of $6.4 million for the year ended September 30, 2023.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional details regarding the repurchase of shares of common stock and the payment of dividends. 57 Table of Contents Analysis of Net Interest Income Net interest income represents the difference between the income we earn on our interest-earning assets and the expense we pay on our interest-bearing liabilities.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional details regarding the repurchase of shares of common stock and the payment of dividends. Analysis of Net Interest Income Net interest income represents the difference between the income we earn on our interest-earning assets and the expense we pay on our interest-bearing liabilities.
Specifically, (1) our capital ratios remain a primary source of financial strength; (2) our core deposits remain stable and the majority of our deposit accounts fall within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines are robust and commensurate to an institution of our size and complexity.
Specifically, (1) our capital ratios remain a primary source of financial strength; (2) our deposits provide a stable source of funding and the majority of our deposit accounts fall within FDIC insurance limits; (3) we maintain adequate access to contingent sources of liquidity; and (4) our risk management practices around an array of financial disciplines which are robust and commensurate to an institution of our size and complexity.
Extending the Duration of Funding Sources As a complement to our strategies to shorten the duration of our interest-earning assets, as described above, we also seek to lengthen the duration of our interest-bearing funding sources.
Extending the Duration of Funding Sources As a complement to our strategies to shorten the fixed rate duration of our interest-earning assets, as described above, we also seek to lengthen the duration of our interest-bearing funding sources.
Products that do not result in an effective mix of repayment ability are not offered. We use stringent, conservative lending standards for underwriting to reduce our credit risk. For first mortgage loans originated or purchased during the current fiscal year, the average credit score was 774, and the average LTV was 71% at origination.
Products that do not result in an effective mix of repayment ability are not offered. We use stringent, conservative lending standards for underwriting to reduce our credit risk. For first mortgage loans originated or purchased during the current fiscal year, the average credit score was 778, and the average LTV was 70% at origination.
At September 30, 2023, 90% of our assets consisted of residential real estate loans (both “held for sale” and “held for investment”) and home equity loans and lines of credit.
At September 30, 2024, 90% of our assets consisted of residential real estate loans (both “held for sale” and “held for investment”) and home equity loans and lines of credit.
We generally seek to maintain a minimum liquidity ratio of 5% (which we compute as the sum of cash and cash equivalents plus unencumbered investment securities for which ready markets exist, divided by total average assets). For the year ended September 30, 2023, the liquidity ratio averaged 5.53% for the Association.
We generally seek to maintain a minimum liquidity ratio of 5% (which we compute as the sum of cash and cash equivalents plus unencumbered investment securities for which ready markets exist, divided by total average assets). For the year ended September 30, 2024, the liquidity ratio averaged 5.95% for the Association.
Third Federal Savings, MHC has the approval of its members to waive dividends aggregating up to $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 11, 2023, and subsequently received the non-objection from the FRB.
Third Federal Savings, MHC has the approval of its members to waive dividends aggregating up to $1.13 per share on the common stock of the Company for the 12 months following the special meeting of members held on July 9, 2024, and subsequently received the non-objection from the FRB.
These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, longer-term (e.g. four to six 52 Table of Contents years) fixed-rate advances from the FHLB of Cincinnati, and shorter-term (e.g. three months) funding, the durations of which are extended by correlated interest rate exchange contracts ("swap").
These efforts include monitoring the relative costs of alternative funding sources such as retail certificates of deposit, brokered certificates of deposit, longer-term (e.g. three years or greater) fixed-rate advances from the FHLB of Cincinnati, and shorter-term (e.g. one or three months) funding, the durations of 52 Table of Contents which are extended by correlated interest rate exchange contracts ("swap").
At September 30, 2023, $3.3 million of long-term, fixed-rate residential first mortgage loans were classified as "held for sale". Our cash flows are derived from operating activities, investing activities and financing activities as reported in our CONSOLIDATED STATEMENTS OF CASH FLOWS included in the CONSOLIDATED FINANCIAL STATEMENTS .
At September 30, 2024, $17.8 million of long-term, fixed-rate residential first mortgage loans were classified as "held for sale". Our cash flows are derived from operating activities, investing activities and financing activities as reported in our CONSOLIDATED STATEMENTS OF CASH FLOWS included in the CONSOLIDATED FINANCIAL STATEMENTS .
Other Interest Rate Risk Management Tools We also manage interest rate risk by selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.
Selling Fixed Rate Loans in the Secondary Market We also manage interest rate risk by selectively selling a portion of our long-term, fixed-rate mortgage loans in the secondary market.
During the year ended September 30, 2023, we had average outstanding borrowed funds of $5.11 billion, as compared to $3.67 billion during the year ended September 30, 2022. Refer to the Extending the Duration of Funding Sources section of the Overview and the General section of Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further discussion.
During the year ended September 30, 2024, we had average outstanding borrowed funds of $4.99 billion, as compared to $5.11 billion during the year ended September 30, 2023. Refer to the Extending the Duration of Funding Sources section of the Overview and the General section of Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further discussion.
In an effort to align our credit risk exposure with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed.
In an effort to limit our credit risk exposure and keep it consistent with the low risk appetite approved by the Board of Directors, the credit eligibility criteria is evaluated to ensure a successful homeowner has the primary source of repayment, followed by a collateral position that allows for a secondary source of repayment, if needed.
Each funding alternative is monitored and evaluated based on its effective interest payment rate, options exercisable by the creditor (early withdrawal, right to call, etc.), and collateral requirements. Refer to Notes 10 . DEPOSITS and 17. BORROWED FUNDS for additional details on balances.
Each funding alternative is monitored and evaluated based on its effective interest payment rate, options exercisable by the creditor (early withdrawal, right to call, etc.), and collateral requirements. Refer to Notes 9. DEPOSITS and 10. BORROWED FUNDS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional details on balances.
We believe that the most critical accounting policies and estimates upon which our financial condition and results of operations depend, and which involve the most complex subjective decisions or assessments, relate to the allowance for credit losses, income taxes and pension benefits. Allowance for Credit Losses.
We believe that the most critical accounting estimates upon which our financial condition and results of operations depend, and which involve the most complex subjective decisions or assessments, relate to the allowance for credit losses. Allowance for Credit Losses.
Of the total mortgage loan originations and purchases for the year ended September 30, 2023, 25.8% are secured by properties in states other than Ohio or Florida. Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth.
Of the total mortgage loan originations and purchases for the year ended September 30, 2024, 20.7% are secured by properties in states other than Ohio or Florida. Maintaining Access to Adequate Liquidity and Diverse Funding Sources to Support our Growth.
Refer to the Controlling Our Interest Rate Risk Exposure section of the Overview for additional information. The allowance for credit losses was $104.8 million, or 0.69% of total loans receivable, at September 30, 2023, and included a $27.5 million liability for unfunded commitments.
Refer to the Controlling Our Interest Rate Risk Exposure section of the Overview for additional information. The allowance for credit losses was $97.8 million, or 0.64% of total loans receivable, at September 30, 2024, and included a $27.8 million liability for unfunded commitments.
Principal and interest received on loans serviced for others and owed to investors experienced a net decrease of $0.1 million to $29.8 million during the year ended September 30, 2023, compared to a net decrease of $11.6 million to $29.9 million during the year ended September 30, 2022.
Principal and interest received on loans serviced for others and owed to investors experienced a net decrease of $1.0 million to $28.8 million during the year ended September 30, 2024, compared to a net decrease of $0.1 million to $29.8 million during the year ended September 30, 2023.
At September 30, 2023, the Company had, in the form of cash and a demand loan from the Association, $173.7 million of funds readily available to support its stand-alone operations.
At September 30, 2024, the Company had, in the form of cash and a demand loan from the Association, $126.2 million of funds readily available to support its stand-alone operations.
At September 30, 2022, the allowance for credit losses was $99.9 million, or 0.70% of total loans receivable and included a $27.0 million liability for unfunded commitments. Refer to Note 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional discussion.
At September 30, 2023, the allowance for credit losses was $104.8 million, or 0.69% of total loans receivable and included a $27.5 million liability for unfunded commitments. Refer to Note 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for additional discussion.
In these challenging economic times with an extended inverted yield curve, the Association has found it financially beneficial to increase the use of swaps to lower our borrowing costs and extend the duration of our liabilities. For more details, refer to Notes 10 . BORROWED FUNDS and 17. DERIVATIVE INSTRUMENTS to the unaudited consolidated financial statements.
In challenging economic times, such as with an extended inverted yield curve, the Association has found it financially beneficial to use swaps with a relatively lower cost to extend the duration of our liabilities. For more details, refer to Notes 10 . BORROWED FUNDS and 17. DERIVATIVE INSTRUMENTS of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .
The total balance of borrowed funds at September 30, 2023, all from the FHLB, included $592.0 million of overnight advances, $1.51 billion of term advances with a weighted average maturity of approximately 2.2 years, and $3.15 billion of short-term advances aligned with interest rate swap contracts.
The total balance of borrowed funds at September 30, 2024, all from the FHLB, included $40.0 million of overnight advances, $1.81 billion of term advances with a weighted average maturity of approximately 2.0 years, and $2.93 billion of short-term advances aligned with interest rate swap contracts.
Refer to Controlling Our Interest Rate Risk Exposure of the Overview section for further discussion. Provision (Release) for Credit Losses . We recorded a release to the allowance for credit losses of $1.5 million during the year ended September 30, 2023 compared to a $1.0 million provision for the allowance during the year ended September 30, 2022.
Refer to Controlling Our Interest Rate Risk Exposure of the Overview section for further discussion. Provision (Release) for Credit Losses . We recorded a release of the allowance for credit losses of $1.5 million during each of the years ended September 30, 2024 and September 30, 2023.
Other changes include a $62.1 million net positive change in accumulated other comprehensive income, primarily related to changes in market values due to fluctuations in market interest rates and maturities of swap contracts, and $9.0 million of positive change related to activity in the Company's stock compensation and employee stock ownership plans.
Other changes include a $100.8 million net negative change in accumulated other comprehensive income, primarily related to changes in market values due to fluctuations in market interest rates and maturities of swap contracts, and $7.6 million of positive change related to activity in the Company's stock compensation and employee stock ownership plans.
The provision for the year ended September 30, 2022 included $17.1 million of federal income tax provision and $0.4 million of state income tax provision. Our combined effective tax rate was 19.4% during the year ended September 30, 2023 and 19.0% during the year ended September 30, 2022.
The provision for the year ended September 30, 2023, included $17.3 million of federal income tax provision and $0.8 million of state income tax provision. Our combined effective tax rate was 20.7% during the year ended September 30, 2024, and 19.4% during the year ended September 30, 2023.
The interest rate spread was 1.57% for the fiscal year ended September 30, 2023 compared to 1.75% at September 30, 2022. The net interest margin was 1.80% for the fiscal year ended September 30, 2023 and 1.88% for the fiscal year ended September 30, 2022.
The interest rate spread was 1.38% for the fiscal year ended September 30, 2024, compared to 1.57% at September 30, 2023. The net interest margin was 1.69% for the fiscal year ended September 30, 2024, and 1.80% for the fiscal year ended September 30, 2023.
At September 30, 2023, we had $5.25 billion of FHLB of Cincinnati advances, no outstanding borrowings from the FRB-Cleveland Discount Window and no outstanding borrowings in the form of Fed Funds. Additionally, at September 30, 2023, we had $1.16 billion of brokered CDs.
At September 30, 2024, we had $4.77 billion of FHLB of Cincinnati advances, no outstanding borrowings from the FRB-Cleveland Discount Window and no outstanding borrowings in the form of Fed Funds. Additionally, at September 30, 2024, we had $1.22 billion of brokered CDs.
Quantitative and Qualitative Disclosures About Market Risk for additional discussion regarding short-term borrowings and interest-rate swaps. Borrowers' advances for insurance and taxes increased by $7.2 million, or 6%, to $124.4 million at September 30, 2023, from $117.2 million at September 30, 2022. This change is consistent with increases in our residential mortgage loan portfolio.
Quantitative and Qualitative Disclosures About Market Risk for additional discussion regarding short-term borrowings and interest-rate swaps. Borrowers' advances for insurance and taxes decreased by $10.8 million, or 9%, to $113.6 million at September 30, 2024, from $124.4 million at September 30, 2023. This change is consistent with decreases in our residential mortgage loan portfolio.
We experienced a net increase in total deposits of $528.8 million during the year ended September 30, 2023 compared to a net decrease of $72.5 million during the year ended September 30, 2022. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.
We experienced a net increase in total deposits of $745.3 million during the year ended September 30, 2024 compared to a net increase of $520.0 million during the year ended September 30, 2023. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.
Additionally, collateral pledges are not provided with respect to our retail CDs or our brokered CDs, but are required for our advances from the FHLB of Cincinnati as well as for our interest rate exchange contracts. We will continue to evaluate the structure of our funding sources based on current needs.
Additionally, collateral pledges are not provided with respect to our retail CDs or our brokered CDs, but are required for our advances from the FHLB of Cincinnati as well as for our interest rate exchange contracts. We will continue to evaluate the structure of our funding sources balancing the need to extend duration and manage cost.
The balance of brokered CDs at September 30, 2023 was $1.16 billion, which is an increase of $587.4 million from the balance of $575.2 million at September 30, 2022. Based on FDIC insurance limits by ownership structure, the total uninsured deposits were $322.5 million and $366.7 million at September 30, 2023 and September 30, 2022, respectively.
The balance of brokered CDs at September 30, 2024, was $1.22 billion, which is an increase of $54.7 million from the balance of $1.16 billion at September 30, 2023. Based on FDIC insurance limits by ownership structure, the total uninsured deposits were $349.3 million and $322.5 million at September 30, 2024 and September 30, 2023, respectively.
Refer to the Extending the Duration of Funding Sources section of the Overview and Comparison of Financial Condition for further discussion. Net Interest Income . Net interest income increased $16.2 million, or 6%, to $283.6 million during the year ended September 30, 2023 from $267.4 million during the year ended September 30, 2022.
Refer to the Extending the Duration of Funding Sources section of the Overview and Comparison of Financial Condition for further discussion. Net Interest Income . Net interest income decreased $5.1 million, or 2%, to $278.5 million during the year ended September 30, 2024, from $283.6 million during the year ended September 30, 2023.
At September 30, 2023, the allowance for credit losses was $102.6 million or 0.67% of total loans. An increase or decrease of 10% in the allowance at September 30, 2023 would result in a $10.3 million charge or release, respectively, to income before income taxes.
At September 30, 2024, the allowance for credit losses was $97.8 million, or 0.64% of total loans. An increase or decrease of 10% in the allowance at September 30, 2024, would result in a $9.8 million charge or release, respectively, to income before income taxes.
Commitments originated for home equity lines of credit and equity and bridge loans were $1.70 billion for the year ended September 30, 2023, compared to $2.16 billion for the year ended September 30, 2022. At September 30, 2023, pending commitments to originate new home equity lines of credit were $64.2 million and equity and bridge loans were $80.9 million.
Commitments originated for home equity lines of credit and equity and bridge loans were $2.28 billion for the year ended September 30, 2024, compared to $1.70 billion for the year ended September 30, 2023. At September 30, 2024, pending commitments to originate new home equity lines of credit were $98.2 million and equity and bridge loans were $74.4 million.
First mortgage loans (primarily fixed-rate, mortgage refinances with terms of 15 years or more and Home Ready) are originated under Fannie Mae procedures and are eligible for sale to Fannie Mae either as whole loans or within mortgage-backed securities.
First mortgage loans (primarily fixed-rate mortgages with terms of 15 years or more, Home Ready and certain loans purchased through our correspondent lending partner) are originated under Fannie Mae guidelines and are eligible for sale to Fannie Mae either as whole loans or within mortgage-backed securities.
During the year ended September 30, 2023, there was a $587.4 million 61 Table of Contents increase in the balance of brokered CDs (exclusive of acquisition costs and subsequent amortization), which had a balance of $1.16 billion at September 30, 2023. At September 30, 2022, the balance of brokered CDs was $575.2 million.
During the year ended September 30, 2024, there was a $54.7 million 60 Table of Contents increase in the balance of brokered CDs (exclusive of acquisition costs and subsequent amortization), which had a balance of $1.22 billion at September 30, 2024. At September 30, 2023, the balance of brokered CDs was $1.16 billion.
The provision for income taxes was $18.1 million during the year ended September 30, 2023 compared to $17.5 million during the year ended September 30, 2022. The provision for the current year included $17.3 million of federal income tax provision and $0.8 million of state income tax provision.
The provision for income taxes was $20.7 million during the year ended September 30, 2024, compared to $18.1 million during the year ended September 30, 2023. The provision for the current year included $18.8 million of federal income tax provision and $1.9 million of state income tax provision.
We purchased $144.7 million of securities during the year ended September 30, 2023, and $250.0 million during the year ended September 30, 2022. Also, during the year ended September 30, 2023, we purchased $279.2 million of long-term, fixed-rate first mortgage loans.
We purchased $133.5 million of securities during the year ended September 30, 2024, and $144.7 million during the year ended September 30, 2023. Also, during the years ended September 30, 2024 and September 30, 2023, we purchased $308.9 million and $279.2 million of long-term, fixed-rate first mortgage loans.
Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $908.7 million, or 6.4%, to $15.17 billion at September 30, 2023, from $14.26 billion at September 30, 2022, as new originations and additional draws on existing accounts exceeded loan sales and repayments.
Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $156.3 million, or 1.0%, to $15.32 billion at September 30, 2024, from $15.17 billion at September 30, 2023, as new originations and additional draws on existing accounts exceeded loan sales and repayments.
During the year ended September 30, 2023, loan sales, including commitments to sell, totaled $77.2 million, which included sales to Fannie Mae consisting of $66.5 million of long-term, fixed-rate, agency-compliant, non-Home Ready first mortgage loans and $10.7 million of loans that qualified under Fannie Mae's Home Ready initiative.
During the year ended September 30, 2024, loan sales, including commitments to sell, totaled $247.4 million, which included sales to Fannie Mae consisting of $215.6 million of long-term, fixed-rate, agency-compliant, non-Home Ready first mortgage loans and $31.8 million of loans that qualified under Fannie Mae's Home Ready initiative.
At September 30, 2023, approximately 57.2% and 17.7% of the combined total of our residential Core and construction loans held for investment and approximately 25.5% and 22.0% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively.
At September 30, 2024, approximately 58.1% and 17.3% of the combined total of our residential Core and construction loans held for investment and approximately 23.6% and 22.5% of our home equity loans and lines of credit were secured by properties in Ohio and Florida, respectively.
Comparison of Financial Condition at September 30, 2023 and September 30, 2022 Total assets increased $1.13 billion, or 7.1%, to $16.92 billion at September 30, 2023, from $15.79 billion at September 30, 2022. This increase was mainly due to new loan originations exceeding the total of loan sales and principal repayments.
Comparison of Financial Condition at September 30, 2024 and September 30, 2023 Total assets increased $172.8 million, or 1.0%, to $17.09 billion at September 30, 2024, from $16.92 billion at September 30, 2023. This increase was mainly due to new loan originations exceeding the total of loan sales and principal repayments.
During the fiscal year ended September 30, 2023, $624.8 million of three- and five-year “Smart Rate” loans were originated while $1.23 billion of 10-, 15-, and 30-year fixed-rate first mortgage loans were originated or purchased.
During the fiscal year ended September 30, 2024, $157.4 million of three- and five-year “Smart Rate” loans were originated, and $696.8 million of 10-, 15-, and 30-year fixed-rate first mortgage loans were originated or purchased.
During the year ended September 30, 2023, we originated or purchased $1.86 billion of residential mortgage loans, and $1.70 billion of commitments for home equity loans and lines of credit, while during the year ended September 30, 2022, we originated $3.65 billion of residential mortgage loans and $2.16 billion of commitments for home equity loans and lines of credit.
During the year ended September 30, 2024, we originated $854.2 million of residential mortgage loans, and $2.28 billion of commitments for home equity loans and lines of credit, while during the year ended September 30, 2023, we originated $1.86 billion of residential mortgage loans and $1.70 billion of commitments for home equity loans and lines of credit.
Of the total $1.86 billion in first mortgage loans originated and purchased for the fiscal year ended September 30, 2023, 11% were refinance transactions and 89% were purchases, while 34% were adjustable-rate mortgages and 66% were fixed-rate mortgages. Fixed-rate loans with terms of 10 years or less accounted for 2% of total first mortgage loan originations and purchases.
Of the total $854.2 million in first mortgage loans originated and purchased for the fiscal year ended September 30, 2024, 7% were refinance transactions and 93% were purchases, while 18% were adjustable-rate mortgages and 82% were fixed-rate mortgages. Fixed-rate loans with terms of 10 years or less accounted for 1% of total first mortgage loan originations and purchases.
Finally, cash flows from operating activities have been a regular source of funds. During the fiscal years ended September 30, 2023 and 2022, cash flows from operations totaled $90.7 million and $38.9 million, respectively.
Finally, cash flows from operating activities have been a regular source of funds. 54 Table of Contents During the fiscal years ended September 30, 2024 and 2023, cash flows from operations provided $88.6 million and $90.7 million, respectively.
The average yield on interest earning assets increased 102 basis points to 3.89% from 2.87%, compared to a 120 basis point increased in the average rate paid on interest-bearing liabilities to 2.32% in the current year from 1.12% in the prior year.
The average yield on interest earning assets increased 55 basis points to 4.44% from 3.89%, compared to a 74 basis point increase in the average rate paid on interest-bearing liabilities to 3.06% in the current year from 2.32% in the prior year.
At September 30, 2023, loans that are classified as held for sale total $3.3 million. As of September 30, 2023, we serviced $1.93 billion of loans we originated and later sold to investors. We continue to consider liquidity and balance sheet management, as well as secondary market pricing, in evaluating the opportunity to sell loans.
At September 30, 2024, we serviced $1.97 billion of loans we originated and later sold to investors. We continue to consider liquidity and balance sheet management, as well as secondary market pricing, in evaluating the opportunity to sell loans.
Interest expense on CDs increased $75.2 million, or 110%, to $143.4 million during the year ended September 30, 2023 compared to $68.2 million during the year ended September 30, 2022. The increase was attributed primarily to a 117 basis point increase in the average rate paid on CDs to 2.34% during the current year from 1.17% during the prior year.
Interest expense on CDs increased $126.8 million, or 88%, to $270.2 million during the year ended September 30, 2024, compared to $143.4 million during the year ended September 30, 2023. The increase was attributed primarily to a 127 basis point increase in the average rate paid on CDs to 3.61% during the current year, from 2.34% during the prior year.
Interest expense increased $186.5 million, or 131%, to $328.4 million during the current year compared to $141.9 million during the year ended September 30, 2022. The increase primarily resulted from an increase in interest expense on deposits and borrowed funds.
Interest expense increased $127.2 million, or 39%, to $455.6 million during the current year, compared to $328.4 million during the year ended September 30, 2023. The increase primarily resulted from an increase in interest expense on deposits and borrowed funds.
Total bank owned life insurance contracts increased $8.0 million, to $312.0 million at September 30, 2023, from $304.0 million at September 30, 2022, primarily due to changes in cash surrender value. Deposits increased $528.8 million, or 5.9%, to $9.45 billion at September 30, 2023, from $8.92 billion at September 30, 2022.
Total bank owned life insurance contracts increased $5.9 million, to $318.0 million at September 30, 2024, from $312.1 million at September 30, 2023, primarily due to changes in cash surrender value. Deposits increased $745.3 million, or 7.9%, to $10.20 billion at September 30, 2024, from $9.45 billion at September 30, 2023.
The increase was attributed to a combination of a $1.44 billion, or 39%, increase in the average balance of borrowed funds to $5.11 billion during the current year from $3.67 billion during the prior year, and a 124 basis point increase in the average rate paid for these funds to 3.01% during the year ended September 30, 2023 from 1.77% for the year ended September 30, 2022.
The increase was attributed to a combination of a $128.6 million, or 3%, decrease in the average balance of borrowed funds to $4.99 billion during the current year, from $5.11 billion during the prior year, and a 26 basis point increase in the average rate paid for these funds to 3.27% during the year ended September 30, 2024, from 3.01% for the year ended September 30, 2023.
We will continue our efforts to control operating expenses as we grow our business. Critical Accounting Policies and Estimates Critical accounting policies and estimates are defined as those that involve significant judgments and uncertainties, and could potentially give rise to materially different results under different assumptions and conditions.
Critical Accounting Estimates Critical accounting estimates are defined as those that involve significant judgments and uncertainties, and could potentially give rise to materially different results under different assumptions and conditions.
During the fiscal year ended September 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 September 30, 2023.
During the fiscal year ended September 30, 2024, no shares were repurchased. 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 September 30, 2024.
Accrued expenses and other liabilities increased by $28.8 million to $112.9 million at September 30, 2023 from $84.1 million at September 30, 2022.
Accrued expenses and other liabilities decreased by $15.1 million to $97.8 million at September 30, 2024 from $112.9 million at September 30, 2023.
Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term 49 Table of Contents assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits. This difference has been an important component of our net interest income and is fundamental to our operations.
Generally, and particularly over extended periods of time that encompass full economic cycles, interest rates associated with longer-term assets, like fixed-rate mortgages, have been higher than interest rates associated with shorter-term funding sources, like deposits.
No exchange of principal amounts occur and the notional principal amount does not appear on our balance sheet. The Association uses swaps to extend the duration of its funding sources.
The Association uses swaps to extend the duration of its funding sources. Each of the Association's swap agreements is registered on the Chicago Mercantile Exchange and involves the exchange of interest payment amounts based on a notional principal balance. No exchange of principal amounts occur and the notional principal amount does not appear on our balance sheet.
At September 30, 2023, cash and cash equivalents totaled $466.7 million, which represented an increase of 26% from September 30, 2022. Investment securities classified as available for sale, which provide additional sources of liquidity, totaled $508.3 million at September 30, 2023.
At September 30, 2024, cash and cash equivalents totaled $463.7 million, which represented a decrease of 0.64% from September 30, 2023. Investment securities classified as available for sale, which provide additional sources of liquidity, totaled $526.3 million at September 30, 2024.
During the year ended September 30, 2023, the Company repurchased $5.0 million of its common stock. The payment of dividends, support of asset growth and strategic stock repurchases are planned to continue in the future as the focus for future capital deployment activities.
During the year ended September 30, 2024, the Company did not repurchase any shares of its common stock. The payment of dividends, support of asset growth and strategic stock repurchases are planned for the future as the focus for future capital deployment activities.
Net income of $75.3 million for the year ended September 30, 2023 increased $0.7 million compared to $74.6 million for the year ended September 30, 2022. The increase was primarily due to an increase in net interest income, offset by the combined effect of higher non-interest expenses and lower earnings on non-interest income items. Interest and Dividend Income.
Net income of $79.6 million for the year ended September 30, 2024, increased $4.3 million, compared to $75.3 million for the year ended September 30, 2023. The change was primarily due to lower non-interest expenses and an increase in non-interest income, offset by a decrease in net interest income. Interest and Dividend Income.
At September 30, 2023, we had $349.4 million in outstanding commitments to originate or purchase loans. In addition to commitments to originate loans, we had $4.70 billion in unfunded home equity lines of credit to borrowers. CDs due within one year of September 30, 2023 totaled $3.42 billion, or 36.2% of total deposits.
At September 30, 2024, we had $248.0 million in outstanding commitments to originate loans. In addition to commitments to originate loans, we had $5.22 billion in unfunded home equity lines of credit to borrowers. CDs due within one year of September 30, 2024, totaled $4.95 billion, or 48.6% of total deposits.
The requirement limits capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" in addition to the minimum capital requirements. At September 30, 2023, the Association exceeded the regulatory requirement for the "capital conservation buffer".
The Association is subject to the "capital conservation buffer" requirement level of 2.5%. The requirement limits capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" in addition to the minimum capital requirements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAccordingly, although the EVE tables provide an indication of our interest rate risk exposure as of the indicated dates, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will differ from actual results.
Biggest changeTFS Financial Corporation At September 30, Risk Measure (+200 bp Rate Shock) 2024 2023 Pre-Shock EVE $1,313,560 $1,253,978 Post-Shock EVE $1,001,779 $928,976 Amount Change in EVE $(311,781) $(325,002) Percentage Change in EVE (23.74) % (25.92) % Third Federal Savings and Loan Association At September 30, Risk Measure (+200 bp Rate Shock) 2024 2023 Pre-Shock EVE $1,143,608 $1,032,386 Post-Shock EVE $832,140 $707,707 Amount Change in EVE $(311,468) $(324,679) Percentage Change in EVE (27.24) % (31.45) % Accordingly, although the EVE presented in the tables above provides an indication of our interest rate risk exposure as of the indicated dates, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will differ from actual results.
While our core business activities, as described at the beginning of this paragraph, are generally intended to have a positive impact on our IRR profile, the actual impact is determined by a number of factors, including the pace of mortgage asset additions to our balance sheet (including consideration of outstanding commitments to originate those assets), in comparison to the pace of the addition of duration extending funding sources.
While our core business activities, as described at the beginning of this paragraph, are generally intended to have a positive impact on our IRR profile, the actual impact is determined by a number of factors, including the pace of mortgage asset additions (reductions) to our balance sheet (including consideration of outstanding commitments to originate those assets), in comparison to the pace of the addition (reduction) of duration extending funding sources.
It provides a long term view and helps to define changes in equity and duration as a result of changes in interest rates. On the other hand, EaR is based on balance sheet projections going one year and two years forward and assumes new business volume and pricing to calculate net interest income under different interest rate environments.
It provides a long-term view and helps to define changes in equity and duration as a result of changes in interest rates. On the other hand, NII is based on balance sheet projections going one year and two years forward and assumes new business volume and pricing to calculate net interest income under different interest rate environments.
Further, the Board has established the Directors Risk Committee, which, among other responsibilities, conducts regular oversight and review of the guidelines, policies and deliberations of the Asset/Liability Management Committee. We manage our interest rate risk in order to control the exposure of our earnings and capital to changes in interest rates.
Further, the Board has established the Director's Risk Committee, which, among other responsibilities, conducts regular oversight and review of the guidelines, policies and deliberations of the Asset/Liability Management Committee. We manage our interest rate risk in order to control the exposure of our earnings and capital to changes in interest rates.
EVE is a stochastic model using 150 different interest rate paths to compute market value at the account level for each of the categories on the balance sheet whereas EaR uses the implied forward curve to compute interest income/expense at the account level for each of the categories on the balance sheet.
EVE is a stochastic model using 150 different interest rate paths to compute market value at the account level for each of the categories on the balance sheet whereas NII uses the implied forward curve to compute interest income/expense at the account level for each of the categories on the balance sheet.
EaR is calculated to determine the sensitivity of net interest income under different interest rate scenarios. With each of these models, specific policy limits have been established for the Association that are compared with the actual month end results.
NII sensitivity is calculated to determine the sensitivity of net interest income under different interest rate scenarios. With each of these models, specific policy limits have been established for the Association that are compared with the actual month end results.
In this regard, the interest rate risk information presented above assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
In this regard, the interest rate risk information presented below assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
The manner in which actual yields, costs and consumer behavior respond to changes in market interest rates may vary from the inherent methodologies used to measure interest rate risk through EaR.
The manner in which actual yields, costs and consumer behavior respond to changes in market interest rates may vary from the inherent methodologies used to measure interest rate risk through changes in EVE.
In addition to EVE calculations, we use our simulation model to analyze the sensitivity of our net interest income to changes in interest rates (the institution’s EaR).
In addition to EVE calculations, we use our simulation model to analyze the sensitivity of our net interest income to changes in interest rates (the institution’s NII).
In this regard, the EVE tables presented above assume: • no new growth or business volumes; • that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, except for reductions to reflect mortgage loan principal repayments along with modeled prepayments and defaults, and deposit decays; and • that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
In this regard, our EVE estimates assume: • no new growth or business volumes; • that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, except for reductions to reflect mortgage loan principal repayments along with modeled prepayments and defaults, and deposit decays; and 62 Table of Contents • that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
Net interest income is the difference between the interest income that we earn on our interest-earning assets, such as loans and securities, and the interest that we pay on our interest- 65 Table of Contents bearing liabilities, such as deposits and borrowings.
Net interest income is the difference between the interest income that we earn on our interest-earning assets, such as loans and securities, and the interest that we pay on our interest-bearing liabilities, such as deposits and borrowings.
In addition to our core business activities, which seek to originate Smart Rate (adjustable) loans, home equity lines of credit (adjustable) and 10-year fixed-rate loans funded by borrowings from the FHLB and intermediate term CDs (including brokered CDs), and which are intended to have a favorable impact on our IRR profile, the impact of several other items and events resulted in the 279 and 231 basis point deterioration in the Pre-Shock EVE Ratio (base valuation) measures at September 30, 2023, when compared to the measures at September 30, 2022 for the Company and Association, respectively.
In addition to our core business activities, which seek to originate Smart Rate (adjustable) loans, home equity lines of credit (adjustable) and 10-year fixed-rate loans funded by borrowings from the FHLB and intermediate term CDs (including brokered CDs), and which are intended to have a favorable impact on our IRR profile, the impact of several other items and events resulted in an improvement in the Pre-Shock EVE (base valuation) of 4.54% and 9.73% at September 30, 2024, when compared to the measures at September 30, 2023, for the Company and Association, respectively.
In the event of a 100 basis point decrease in interest rates, the Company and Association would experience a 8.91% and 10.80% increase in EVE, respectively. 64 Table of Contents The following tables are based on the calculations contained in the previous tables, and set forth the change in the EVE at a +200 basis point rate of shock at September 30, 2023, with comparative information as of September 30, 2022.
In the event of a 100 basis point decrease in interest rates, the Company and Association would experience a 6.85% and 7.86% increase in EVE, respectively. 64 Table of Contents The following tables are based on the calculations contained in the previous tables, and set forth the change in the EVE at a +200 basis point rate of shock at September 30, 2024, with comparative information as of September 30, 2023.
Factors contributing to these deteriorations included increases in market interest rates, capital actions by the Association, and changes due to business activity.
Factors contributing to the Association's improvement included decrease in market interest rates, capital actions by the Association, and changes due to business activity.
Changes to the methodology and/or assumptions used in the model will result in reported IRR profiles and reported IRR exposures that will be different, and perhaps significantly, from the results reported above. Earnings at Risk.
Changes to the methodology and/or assumptions used in the model will result in reported IRR profiles and reported IRR exposures that will be different, and perhaps significantly, from the results reported below. Net Interest Income.
The tables above indicate that at September 30, 2023, in the event of an increase of 200 basis points in all interest rates, the Company and Association would experience a 25.92% and 31.45% decrease in EVE, respectively.
The tables above indicate that at September 30, 2024, in the event of an increase of 200 basis points in all interest rates, the Company and Association would experience a 23.74% and 27.24% decrease in EVE, respectively.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
The model is tailored specifically to our organization, which, we believe, improves its predictive accuracy. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
We then calculate what the estimated net interest income would be for the same period under numerous interest rate scenarios. The simulation process is subject to continual enhancement, modification, refinement and adaptation.
We then calculate what the estimated net interest income would be for the same period under numerous interest rate scenarios. The simulation process is subject to continual enhancement, modification, refinement and adaptation. The Company and Association use a "ramped" assumption in preparing the NII sensitivity simulation estimates for us in its public disclosure.
In addition to the preparation of computations as described above, we also formulate simulations based on a variety of non-linear changes in interest rates and a variety of non-constant balance sheet composition scenarios. Other Considerations. The EVE and EaR analyses are similar in that they both start with the same month end balance sheet amounts, weighted average coupon and maturity.
In addition to the preparation of computations as described above, we also formulate simulations based on a variety of non-linear changes in interest rates and a variety of non-constant balance sheet composition scenarios. Other Considerations.
In the event that there is a breach of policy limits that extends beyond two consecutive quarter end measurement periods, management is responsible for taking such action, similar to those described under the preceding heading of General , as may be necessary in order to return the Association's interest rate risk profile to a position that is in compliance with the policy.
In the event that there is a breach of policy limits that extends beyond two consecutive quarter end measurement periods, management is responsible for taking such action, similar to those described under the preceding heading of General , as may be necessary in order to return the Association's interest rate risk profile to a position that is in compliance with the policy. 63 Table of Contents The following tables present the estimated changes in the Company's and Association's EVE and NII at September 30, 2024, that would result from the indicated changes in the United States Treasury yield curve and other relevant market interest rates.
As of September 30, 2023, the estimated EaR for the 12 months ending September 30, 2024 would decrease by 1.75% for the Company and 2.71% for the Association in the event that market interest rates used in the simulation were adjusted in incremental amounts (termed a "ramped" format) during the 12 month measurement period to an aggregate increase in 200 basis points.
(2) Estimated NII is calculated for the prospective 12 months ending September 30, 2025 in the event that market interest rates used in the simulation were adjusted in incremental amounts (termed a "ramped" format) during the 12 month measurement period to an aggregate increase as indicated in the Change in Interest Rates column.
The underlying prepayment, decay and default assumptions are also the same and they both start with the same month end "markets" (Treasury and FHLB yield curves, etc.). From that similar starting point, the models follow divergent paths.
The EVE and NII sensitivity analyses are similar in that they both start with the same month end balance sheet amounts, weighted average coupon and maturity. The underlying prepayment, decay and default assumptions are also the same and they both start with the same month end "markets" (Treasury and FHLB yield curves, etc.).
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An increase in interest rates from 2% to 3% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below. The model is tailored specifically to our organization, which, we believe, improves its predictive accuracy.
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The "ramped" assumption calculates NII sensitivity in the event that the market interest rates used in the simulation were adjusted in incremental amounts during the 12 month measurement period. The manner in which actual yields, costs and consumer behavior respond to changes in market interest rates may vary from the inherent methodologies used to measure interest rate risk through NII.
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The following table presents the estimated changes in the Company's EVE at September 30, 2023 that would result from the indicated instantaneous changes in the United States Treasury yield curve and other relevant market interest rates. 63 Table of Contents TFS Financial Corporation Change in Interest Rates (basis points) (1) Estimated EVE (2) Estimated Increase (Decrease) in EVE EVE as a Percentage of Present Value of Assets (3) EVE Ratio (4) Increase (Decrease) (basis points) Amount Percent (Dollars in thousands) +300 $ 740,527 $ (513,451) (40.95) % 5.28 % (293) +200 928,976 (325,002) (25.92) % 6.44 % (177) +100 1,111,172 (142,806) (11.39) % 7.49 % (72) 0 1,253,978 — — % 8.21 % — -100 1,365,669 111,691 8.91 % 8.70 % 49 -200 1,422,575 168,597 13.44 % 8.83 % 62 -300 1,411,363 157,385 12.55 % 8.56 % 35 The following table presents the estimated changes in the Association's EVE at September 30, 2023 that would result from the indicated instantaneous changes in the United States Treasury yield curve and other relevant market interest rates.
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From that similar starting point, the models follow divergent paths.
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Third Federal Savings and Loan Association Change in Interest Rates (basis points) (1) Estimated EVE (2) Estimated Increase (Decrease) in EVE EVE as a Percentage of Present Value of Assets (3) EVE Ratio (4) Increase (Decrease) (basis points) Amount Percent (Dollars in thousands) +300 $ 519,419 $ (512,967) (49.69) % 3.71 % (306) +200 707,707 (324,679) (31.45) % 4.91 % (186) +100 889,739 (142,647) (13.82) % 6.00 % (77) 0 1,032,386 — — % 6.77 % — -100 1,143,898 111,512 10.80 % 7.30 % 53 -200 1,200,628 168,242 16.30 % 7.46 % 69 -300 1,189,237 156,851 15.19 % 7.22 % 45 _________________ (1) Assumes an instantaneous uniform change in interest rates at all maturities.
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TFS Financial Corporation Change in Interest Rates (basis points) Estimated EVE (1) Estimated NII (2) Amount Percentage Change Amount Percentage Change (Dollars in thousands) +200 $ 1,001,779 (23.74) % $ 278,888 1.85 % +100 1,177,196 (10.38) % 276,377 0.93 % 0 1,313,560 — % 273,822 — % -100 1,403,591 6.85 % 259,508 (5.23) % -200 1,431,606 8.99 % 242,603 (11.40) % Third Federal Savings and Loan Association Change in Interest Rates (basis points) Estimated EVE (1) Estimated NII (2) Amount Percentage Change Amount Percentage Change (Dollars in thousands) +200 $ 832,140 (27.24) % $ 269,416 1.27 % +100 1,007,402 (11.91) % 267,688 0.62 % 0 1,143,608 — % 266,030 — % -100 1,233,478 7.86 % 252,437 (5.11) % -200 1,261,328 10.29 % 236,306 (11.17) % _________________ (1) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
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(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. (3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets. (4) EVE Ratio represents EVE divided by the present value of assets.
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Estimated EVE assumes an instantaneous uniform change in interest rates at all maturities.
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TFS Financial Corporation At September 30, Risk Measure (+200 bp Rate Shock) 2023 2022 Pre-Shock EVE Ratio 8.21 % 11.00 % Post-Shock EVE Ratio 6.44 % 9.25 % Sensitivity Measure in basis points (177) (175) Percentage Change in EVE Ratio (25.92) % (20.25) % Third Federal Savings and Loan Association At September 30, Risk Measure (+200 bp Rate Shock) 2023 2022 Pre-Shock EVE Ratio 6.77 % 9.08 % Post-Shock EVE Ratio 4.91 % 6.71 % Sensitivity Measure in basis points (186) (237) Percentage Change in EVE Ratio (31.45) % (29.92) % The manner in which actual yields, costs and consumer behavior respond to changes in market interest rates may vary from the inherent methodologies used to measure interest rate risk through changes in EVE.
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The Company and Association use the "ramped" assumption in preparing the EaR simulation estimates for use in its public disclosures.
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The Company and Association continue to calculate instantaneous scenarios, and as of September 30, 2023, the estimated EaR for the 12 months ending September 30, 2024, would decrease by 5.16% and 6.91%, respectively, in the event of an instantaneous 200 basis point increase in market interest rates.

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