TFS Financial Corporation Announces First Quarter Fiscal Year 2026 Results

CLEVELAND--( BUSINESS WIRE)--TFS Financial Corporation (NASDAQ: TFSL) (the "Company"), the holding company for Third Federal Savings and Loan Association of Cleveland (the "Association"), today announced results for the quarter ended December 31, 2025.

“We have had a positive start to our fiscal year as we quickly adapted to three recent Fed rate cuts,” said Chairman and CEO Marc A. Stefanski. “Our net interest income increased by $7.4 million over the same period in 2025, and we continue to effectively navigate competition for savings customers while also managing our margin. Our Tier 1 capital ratio of 10.75%, demonstrates our strength and stability as we consistently exceed the amount considered well capitalized.”

Operating Results for the Quarter ended December 31, 2025 compared to the Quarter ended September 30, 2025

The Company reported net income of $22.3 million for the quarter ended December 31, 2025 compared to $26.0 million for the quarter ended September 30, 2025. The decrease in net income was mainly due to a decrease in net interest income and an increase in non-interest expense, partially offset by a release of provision for credit losses.

Net interest income decreased $1.6 million, or 2.07%, to $75.7 million for the quarter ended December 31, 2025 when compared to the quarter ended September 30, 2025. The main reason for the decrease was lower average yields on home equity lines of credit and cash equivalents, following three recent 25 basis point interest rate cuts to the Wall Street Journal Prime Rate, the index to which home equity lines of credit are linked. The interest rate spread for the quarter ended December 31, 2025 was 1.47% compared to 1.54% for the preceding quarter. The net interest margin was 1.79% for the quarter ended December 31, 2025 and 1.84% for the quarter ended September 30, 2025.

During the quarter ended December 31, 2025, there was a $1.0 million release of provision for credit losses compared to a $1.0 million provision expense for the quarter ended September 30, 2025. The total allowance for credit losses at December 31, 2025 was $104.1 million, or 0.66% of total loans receivable, compared to $104.4 million, or 0.67% of total loans receivable, at September 30, 2025. The overall allowance decreased primarily due to a decline in unfunded commitments for loan originations. The liability for unfunded commitments included in the total allowance was $29.1 million at December 31, 2025 and $30.1 million at September 30, 2025. Net loan recoveries were $0.7 million during the quarter ended December 31, 2025 compared to $1.0 million for the quarter ended September 30, 2025.

Total loan delinquencies increased $2.2 million to $36.9 million, or 0.23% of total loans receivable, at December 31, 2025 from $34.7 million, or 0.22% of total loans receivable, at September 30, 2025. Non-accrual loans increased $0.3 million to $39.0 million, or 0.25% of total loans receivable, at December 31, 2025 from $38.7 million, or 0.25% of total loans receivable, at September 30, 2025.

Total non-interest expense for the quarter ended December 31, 2025 increased $4.2 million, or 8.07%, from the prior quarter to $56.2 million, mainly due to increases of $2.9 million in salaries and employee benefits, $1.7 million in marketing costs and $0.6 million in office property, equipment and software expenses, partially offset by a $0.8 million decrease in other expenses. Salaries and benefits increased primarily due to a one-time after-tax bonus of $1,500 given to all associates in December 2025, in appreciation for their contributions to record earnings in fiscal year 2025, and a $0.8 million increase in group health insurance costs. The increase in marketing costs resulted from initiatives aimed at attracting and retaining deposit customers. The decrease in other expenses was primarily the result of decreases in down payment assistance, appraisal, credit report and professional consultant costs, partially offset by an increase in postage.

Operating Results for the Quarter ended December 31, 2025 compared to the Quarter ended December 31, 2024

The Company reported net income of $22.3 million for the quarter ended December 31, 2025 compared to $22.4 million for the quarter ended December 31, 2024. Compared to the same quarter of the previous year, net interest income and non-interest income increased, while the release of provision for credit losses decreased. These changes were offset by an increase in non-interest expense.

Net interest income increased $7.4 million, or 10.83%, to $75.7 million for the quarter ended December 31, 2025 compared to $68.3 million for the same quarter a year ago. When comparing the two periods, the average balance and yield of interest-earnings assets increased $403.0 million and 15 basis points while the average balance and cost of interest-bearing liabilities increased $397.6 million and two basis points. The interest rate spread for the quarter ended December 31, 2025 was 1.47% compared to 1.34% for the year-ago quarter. The net interest margin was 1.79% for the quarter ended December 31, 2025 and 1.66% for the quarter ended December 31, 2024.

During the quarter ended December 31, 2025, there was a $1.0 million release of provision for credit losses compared to a $1.5 million release of provision for the quarter ended December 31, 2024. The total allowance for credit losses was $104.1 million, or 0.66% of total loans receivable, at December 31, 2025 compared to $97.8 million, or 0.64% of total loans receivable, at December 31, 2024. The increase in the allowance was driven by an increase in home equity line of credit commitments, with a partially offsetting decrease in the residential mortgage portfolio. Home equity lines of credit carry a higher life of loan loss estimate than residential mortgage loans.

Total non-interest income increased by $1.5 million, or 23.07%, to $8.0 million for the quarter ended December 31, 2025, from $6.5 million for the quarter ended December 31, 2024. The increase was mainly the result of a $0.3 million increase in fees and service charges and a $1.2 million increase in net gain on the sales of loans. During the quarters ending December 31, 2025 and December 31, 2024, there were $120.8 million and $72.0 million loans sold with net gains on the sale of loans totaling $2.3 million and $1.1 million, respectively.

Total non-interest expense increased $8.3 million, or 17.31%, to $56.2 million for the quarter ended December 31, 2025 from $47.9 million for the same quarter a year ago. The increase was mainly due to increases of $3.9 million in salaries and employee benefits, $2.5 million in marketing costs, $1.0 million in office property, equipment and software and $1.2 million in other expenses. The increase in salaries and benefits was primarily due to a one-time after-tax bonus of $1,500 given to all associates in December 2025, totaling $2.2 million, and an increase in staffing. The increase in marketing costs resulted from initiatives aimed at attracting and retaining deposit customers. Information technology improvements drove the increase in office property, equipment and software expenses. The increase in other expenses was primarily due to increases in down payment assistance and postage.

Financial Condition at December 31, 2025

Total assets increased $42.4 million, or less than 1%, to $17.50 billion at December 31, 2025 from $17.46 billion at September 30, 2025. This change was mainly the result of increases in loans held for investment and prepaid expenses and other assets, partially offset by decreases in investment securities available for sale and loans held for sale.

Investment securities available for sale decreased $66.2 million, or 12.71%, to $454.5 million at December 31, 2025 from $520.7 million at September 30, 2025. This decrease was mainly due to the combined effect of cash flows from security repayments and maturities. During the quarter ended December 31, 2025, a $50.0 million treasury security matured and was not replaced.

Loans held for investment, net of deferred loan fees and allowance for credit losses, increased $78.4 million, or 0.50%, to $15.74 billion at December 31, 2025 from $15.66 billion at September 30, 2025. The increase was offset by a $43.3 million decrease in the portfolio of loans held for sale, which totaled $14.4 million at December 31, 2025. During the quarter ended December 31, 2025, the home equity loans and lines of credit portfolio increased $236.0 million and residential core mortgage loans decreased $153.9 million.

The changes in loans held for sale and loans held for investment were affected by the volume of loans originated, acquired and sold. During the quarter ended December 31, 2025, total first mortgage loan originations were $315.4 million compared to $427.9 million for the quarter ended September 30, 2025 and $176.5 million for the quarter ended December 31, 2024. Of total residential mortgage loans originated during the current period, $268.5 million (85%) were purchase transactions. There was $120.8 million of residential mortgage loans delivered to Fannie Mae on contracts settled during the quarter ended December 31, 2025. Commitments originated for home equity loans and lines of credit were $531.1 million for the quarter ended December 31, 2025 compared to $645.4 million for the quarter ended September 30, 2025 and $559.0 million for the quarter ended December 31, 2024.

Other assets increased $46.7 million, or 41.81%, to $158.4 million at December 31, 2025 from $111.7 million at September 30, 2025. The increase was primarily the result of a $47.9 million increase in the margin requirement on swap contracts after an investment security that had been posted as collateral matured during the quarter ended December 31, 2025.

Deposits decreased by $74.9 million, or 0.72%, to $10.37 billion at December 31, 2025 from $10.45 billion at September 30, 2025. The decrease in deposits included a $494.2 million decrease in the CD portfolio and a $10.0 million decrease in money market accounts, partially offset by a $399.7 million increase in savings accounts and a $27.5 million increase in checking accounts. Some CDs convert to tiered-interest savings accounts at maturity, prompting a shift from CDs to savings accounts between the periods compared. At December 31, 2025, brokered CDs totaled $0.88 billion and included $550.0 million of one- to three-month certificates of deposit accounts aligned with pay-fixed interest rate swap contracts, with a remaining weighted average effective maturity of approximately 2.1 years.

Borrowed funds increased $69.6 million, or 1.43%, to $4.94 billion at December 31, 2025 from $4.87 billion at September 30, 2025. The total balance of borrowed funds at December 31, 2025 consisted of $1.55 billion of long-term advances with a weighted average maturity of approximately 1.7 years, $2.95 billion of three-month advances, aligned with interest rate swap contracts, with a remaining weighted average effective maturity of approximately 2.8 years, and $270.0 million in overnight borrowings, all from the FHLB, and $150 million of fed funds purchased.

Total shareholders' equity increased $7.0 million, or less than 1%, to $1.90 billion at December 31, 2025 from $1.89 billion at September 30, 2025. Activity during the quarter reflects $22.3 million of net income, $1.9 million of stock repurchases, a quarterly dividend of $14.9 million and a negative net adjustment of $2.3 million related to stock compensation and employee stock ownership plans. During the quarter ended December 31, 2025, a total of 139,442 shares of the Company's stock were repurchased at an average cost of $13.66 per share. The Company's eighth stock repurchase program, approved in January 2017, allows for a total of 10,000,000 shares to be repurchased and 5,195,356 shares have been repurchased as of December 31, 2025.

The Company declared and paid a quarterly dividend of 0.2825 per share during the quarter ended December 31, 2025. As a result of a mutual member vote, Third Federal Savings and Loan Association of Cleveland, MHC (the "MHC"), the mutual holding company that owns approximately 81% of the outstanding stock of the Company, was able to waive its receipt of its share of the dividend paid. Under current Federal Reserve regulations, the MHC is required to obtain the approval of its members every 12 months for the MHC to waive its right to receive dividends. As a result of a July 8, 2025 member vote and the subsequent non-objection of the Federal Reserve, the MHC has the approval to waive receipt of up to $1.13 per share of possible dividends to be declared on the Company’s common stock during the twelve months subsequent to the members’ approval (i.e., through July 8, 2026), including a total of up to $0.565 remaining. The MHC has conducted the member vote to approve the dividend waiver each of the past twelve years under Federal Reserve regulations and for each of those twelve years, approximately 97% of the votes cast were in favor of the waiver.

The Company operates under the capital requirements for the standardized approach of the Basel III capital framework (“Basel III Rules”). At December 31, 2025 all of the Company's capital ratios exceeded the amounts required for the Company to be considered "well capitalized" for regulatory capital purposes. The Company's Tier 1 leverage ratio was 10.75%, its Common Equity Tier 1 and Tier 1 ratios, as calculated under the fully phased-in Basel III Rules, were each 17.35% and its total capital ratio was 18.31%.

Presentation slides as of December 31, 2025 will be available on the Company's website, thirdfederal.com, under the Investor Relations link under the "Presentations" heading, beginning January 30, 2026. The Company will not be hosting a conference call to discuss its operating results.

Third Federal Savings and Loan Association is a leading provider of savings and mortgage products, and operates under the values of love, trust, respect, a commitment to excellence and fun. Founded in Cleveland in 1938 as a mutual association by Ben and Gerome Stefanski, Third Federal’s mission is to help people achieve the dream of home ownership and financial security. It became part of a public company in 2007 and celebrated its 85 th anniversary in May 2023. Third Federal, which lends in 28 states and the District of Columbia, is dedicated to serving consumers with competitive rates and outstanding service. Third Federal, an equal housing lender, has 21 full service branches in Northeast Ohio, two lending offices in Central and Southern Ohio, and 15 full service branches throughout Florida.

Forward Looking Statements

This report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include, among other things:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans and prospects and growth and operating strategies;

●

statements concerning trends in our provision for credit losses and charge-offs on loans and off-balance sheet exposures;

●

statements regarding the trends in factors affecting our financial condition and results of operations, including credit quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:

●

significantly increased competition among depository and other financial institutions, including with respect to our ability to charge overdraft fees;

●

inflation and changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments, or our ability to originate loans;

●

general economic conditions, either globally, nationally or in our market areas, including employment prospects, real estate values and conditions that are worse than expected;

●

the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of our loans and other assets, and changes in estimates of the allowance for credit losses;

●

decreased demand for our products and services and lower revenue and earnings because of a recession or other events;

●

changes in consumer spending, borrowing and savings habits, including repayment speeds on loans;

●

adverse changes and volatility in the securities markets, credit markets or real estate markets;

●

our ability to manage market risk, credit risk, liquidity risk, reputational risk, regulatory risk and compliance risk;

●

our ability to access cost-effective funding;

●

legislative or regulatory changes that adversely affect our business, including changes in regulatory costs and capital requirements and changes related to our ability to pay dividends and the ability of Third Federal Savings, MHC to waive dividends;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or the PCAOB;

●

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

●

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

●

future adverse developments concerning Fannie Mae or Freddie Mac;

●

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

●

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

●

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

●

the effects of the current federal government shutdown;

●

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

●

changes in accounting and tax estimates;

●

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

●

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

●

changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio;

●

the effects of global or national war, conflict or acts of terrorism;

●

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.

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

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except share data)

December 31,

2025

September 30,

2025

ASSETS

Cash and due from banks

26,722

24,176

Other interest-earning cash equivalents

429,987

405,263

Cash and cash equivalents

456,709

429,439

Investment securities available for sale

454,493

520,659

Mortgage loans held for sale

14,440

57,662

Loans held for investment, net:

Mortgage loans

15,737,840

15,659,460

Other loans

8,515

8,153

Deferred loan expenses, net

70,317

69,943

Allowance for credit losses on loans

(74,984

)

(74,244

)

Loans, net

15,741,688

15,663,312

Mortgage loan servicing rights, net

8,828

8,549

Federal Home Loan Bank stock, at cost

234,027

235,363

Real estate owned, net

1,975

1,921

Premises, equipment, and software, net

40,446

40,022

Accrued interest receivable

60,295

62,553

Bank owned life insurance contracts

327,337

325,149

Other assets

158,445

111,687

TOTAL ASSETS

17,498,683

17,456,316

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits

10,372,075

10,446,968

Borrowed funds

4,939,835

4,870,219

Borrowers’ advances for insurance and taxes

133,606

113,168

Principal, interest, and related escrow owed on loans serviced

42,256

30,328

Accrued expenses and other liabilities

109,946

101,709

Total liabilities

15,597,718

15,562,392

Commitments and contingent liabilities

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

—

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

3,323

Paid-in capital

1,756,360

1,757,813

Treasury stock, at cost

(774,311

)

(774,340

)

Unallocated ESOP shares

(17,334

)

(18,417

)

Retained earnings—substantially restricted

954,158

946,776

Accumulated other comprehensive loss

(21,231

)

(21,231

)

Total shareholders’ equity

1,900,965

1,893,924

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

17,498,683

17,456,316

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(In thousands, except share and per share data)

For the Three Months Ended

December 31,

2025

September 30,

2025

June 30,

2025

March 31,

2025

December 31,

2024

INTEREST AND DIVIDEND INCOME:

Loans, including fees

184,946

185,332

177,493

171,506

172,152

Investment securities available for sale

4,241

4,708

4,816

4,755

4,455

Other interest and dividend earning assets

8,585

9,013

9,098

9,691

10,161

Total interest and dividend income

197,772

199,053

191,407

185,952

186,768

INTEREST EXPENSE:

Deposits

79,203

78,636

76,803

75,379

77,942

Borrowed funds

42,889

43,094

39,610

38,524

40,498

Total interest expense

122,092

121,730

116,413

113,903

118,440

NET INTEREST INCOME

75,680

77,323

74,994

72,049

68,328

PROVISION (RELEASE) FOR CREDIT LOSSES

(1,000

)

1,000

1,500

(1,500

)

NET INTEREST INCOME AFTER PROVISION (RELEASE) FOR CREDIT LOSSES

76,680

76,323

73,494

70,549

69,828

NON-INTEREST INCOME:

Fees and service charges, net of amortization

2,512

2,617

2,467

2,221

2,224

Net gain on the sale of loans

2,329

2,314

726

1,187

1,115

Increase in and death benefits from bank owned life insurance contracts

2,764

2,650

2,733

2,680

2,682

Other

443

580

1,122

980

482

Total non-interest income

8,048

8,161

7,048

7,068

6,503

NON-INTEREST EXPENSE:

Salaries and employee benefits

30,488

27,579

27,651

27,666

26,606

Marketing services

6,239

4,537

5,810

4,632

3,654

Office property, equipment and software

7,756

7,236

7,653

7,617

6,844

Federal insurance premium and assessments

3,247

3,388

3,519

3,673

3,585

State franchise tax

1,067

1,117

1,204

1,199

1,047

Other expenses

7,433

8,188

7,348

6,301

6,205

Total non-interest expense

56,230

52,045

53,185

51,088

47,941

INCOME BEFORE INCOME TAXES

28,498

32,439

27,357

26,529

28,390

INCOME TAX EXPENSE

6,224

6,440

5,844

5,508

5,964

NET INCOME

22,274

25,999

21,513

21,021

22,426

Earnings per share - basic and diluted

0.08

0.09

0.08

0.07

0.08

Weighted average shares outstanding

Basic

278,754,792

278,764,271

278,832,875

278,729,388

278,538,110

Diluted

283,302,227

279,887,491

279,873,274

279,719,382

279,578,652

TFS FINANCIAL CORPORATION AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS (unaudited)

Three Months Ended

December 31, 2025

September 30, 2025

December 31, 2024

Average

Balance

Interest

Income/

Expense

Yield/

Cost (1)

Average

Balance

Interest

Income/

Expense

Yield/

Cost (1)

Average

Balance

Interest

Income/

Expense

Yield/

Cost (1)

(Dollars in thousands)

Interest-earning assets:

Interest-earning cash

equivalents

386,878

3,827

3.96

385,290

4,180

4.34

424,111

4,949

4.67

Investment securities

20,064

194

3.87

53,974

552

4.09

60,183

674

4.48

Mortgage-backed securities

460,043

4,047

3.52

463,128

4,156

3.59

454,332

3,781

3.33

Loans (2)

15,793,474

184,946

4.68

15,705,190

185,332

4.72

15,326,120

172,152

4.49

Federal Home Loan Bank stock

233,298

4,758

8.16

235,975

4,833

8.19

225,977

5,212

9.23

Total interest-earning assets

16,893,757

197,772

4.68

16,843,557

199,053

4.73

16,490,723

186,768

4.53

Noninterest-earning assets

536,886

570,470

524,634

Total assets

17,430,643

17,414,027

17,015,357

Interest-bearing liabilities:

Checking accounts

790,898

0.04

797,552

172

0.09

826,383

0.04

Savings accounts

1,247,736

3,563

1.14

1,104,938

3,192

1.16

1,289,788

3,353

1.04

Certificates of deposit

8,359,946

75,570

3.62

8,451,255

75,272

3.56

8,058,740

74,499

3.70

Borrowed funds

4,827,275

42,889

3.55

4,911,194

43,094

3.51

4,653,328

40,498

3.48

Total interest-bearing liabilities

15,225,855

122,092

3.21

15,264,939

121,730

3.19

14,828,239

118,440

3.19

Noninterest-bearing liabilities

282,935

229,685

271,640

Total liabilities

15,508,790

15,494,624

15,099,879

Shareholders’ equity

1,921,853

1,919,403

1,915,478

Total liabilities and shareholders’ equity

17,430,643

17,414,027

17,015,357

Net interest income

75,680

77,323

68,328

Interest rate spread (1)(3)

1.47

1.54

1.34

Net interest-earning assets (4)

1,667,902

1,578,618

1,662,484

Net interest margin (1)(5)

1.79

1.84

1.66

Average interest-earning assets to average interest-bearing liabilities

110.95

110.34

111.21

Selected performance ratios:

Return on average assets (1)

0.51

0.60

0.53

Return on average equity (1)

4.64

5.42

4.68

Average equity to average assets

11.03

11.02

11.26

(1)

Annualized.

(2)

Loans include both mortgage loans held for sale and loans held for investment.

(3)

Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)

Net interest margin represents net interest income divided by total interest-earning assets.