TFS Financial Corporation (TFSL)

[US Market News]

TFS Financial Corporation Announces First Quarter Fiscal Year 2026 Results

January 29, 2026 4:11 PM
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.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20260129022639/en/

Chairman and CEO Marc A. Stefanski

“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				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			(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											Three Months Ended											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				70			0.04	%		$	797,552				172			0.09	%		$	826,383				90			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.

 

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Original: TFS Financial Corporation Announces First Quarter Fiscal Year 2026 Results