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TFS Financial (TFSL) - 2025 Q3 - Quarterly Results
TFS Financial TFS Financial (US:TFSL)2025-07-30 20:04

Executive Summary TFS Financial Corporation reported strong third-quarter and year-to-date fiscal 2025 results, driven by increased net interest income and robust loan origination activity, particularly in equity lines of credit. The company maintained a strong capital position, exceeding regulatory requirements Highlights TFS Financial Corporation reported strong third-quarter and year-to-date fiscal 2025 results, driven by increased net interest income and robust loan origination activity, particularly in equity lines of credit. The company maintained a strong capital position, exceeding regulatory requirements - Equity lines of credit originations grew 17% from 2024, indicating strong demand in this segment2 - Net interest margin (NIM) improved six basis points this quarter to 1.81%, reaching a nine-quarter high2 - The company's Tier 1 capital ratio of nearly 11% demonstrates a well-capitalized and stable financial position2 Key Financial Performance (Q3 2025 & YTD Q3 2025) | Metric | Q3 2025 (Millions) | YTD Q3 2025 (Millions) | | :--------------------- | :------------------ | :-------------------- | | Net Income | $21.5 | $65.0 | Operating Results The company's operating results show improved net income and net interest margin across both quarterly and year-to-date comparisons, driven by increased interest income and effective expense management Operating Results (Q3 2025 vs. Q2 2025) The company reported an increase in net income for the quarter ended June 30, 2025, primarily driven by higher net interest income, despite an increase in non-interest expenses. The net interest margin saw a notable improvement Quarterly Operating Performance (Q3 2025 vs. Q2 2025) | Metric | Q3 2025 (Millions) | Q2 2025 (Millions) | Change (Millions) | Change (%) | | :---------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Net Income | $21.5 | $21.0 | $0.5 | 2.4% | | Net Interest Income | $75.0 | $72.0 | $3.0 | 4.2% | | Provision for Credit Losses | $1.5 | $1.5 | $0.0 | 0.0% | | Non-Interest Expense | $53.2 | $51.1 | $2.1 | 4.1% | - The net interest margin increased by six basis points to 1.81% in Q3 2025, driven by a ten basis point increase in the weighted average yield of interest-bearing assets, partially offset by a five basis point increase in the cost of interest-bearing liabilities4 - The increase in non-interest expense was mainly due to a $1.2 million increase in marketing services and a $1.0 million increase in other expenses, including loan origination costs6 Operating Results (YTD Q3 2025 vs. YTD Q3 2024) For the nine months ended June 30, 2025, the company achieved higher net income compared to the prior year, primarily due to increases in net interest income and non-interest income, coupled with a decrease in non-interest expense, despite a higher provision for credit losses Year-to-Date Operating Performance (YTD Q3 2025 vs. YTD Q3 2024) | Metric | YTD Q3 2025 (Millions) | YTD Q3 2024 (Millions) | Change (Millions) | Change (%) | | :---------------------- | :--------------------- | :--------------------- | :---------------- | :--------- | | Net Income | $65.0 | $61.4 | $3.6 | 5.9% | | Net Interest Income | $215.4 | $209.7 | $5.7 | 2.7% | | Provision for Credit Losses | $1.5 | ($2.5) (Release) | $4.0 | N/A | | Non-Interest Income | $20.6 | $18.3 | $2.3 | 12.6% | | Non-Interest Expense | $152.2 | $153.3 | ($1.1) | (0.7)% | - The net interest margin improved to 1.74% for YTD Q3 2025 from 1.69% in the prior year, as the yield on interest-earning assets increased more than the cost of interest-bearing liabilities12 - The total allowance for credit losses increased by $4.6 million to $102.4 million (0.66% of total loans receivable) at June 30, 2025, primarily due to growth in equity lines of credit and a slight deterioration in economic factors14 - Non-interest income growth was mainly driven by a $1.2 million increase in fees and service charges (net of amortization) and a $1.4 million increase in net gain on the sale of loans15 Financial Condition The company's financial condition shows growth in total assets and the loan portfolio, primarily funded by increased borrowed funds and deposits, with a notable shift towards home equity loans Financial Condition (Q3 2025 vs. Q2 2025) The company's total assets grew quarter-over-quarter, primarily fueled by an increase in loans held for investment and loans held for sale. This growth was funded by an increase in borrowed funds, as deposits experienced a slight decrease Key Balance Sheet Changes (Q3 2025 vs. Q2 2025) | Metric | June 30, 2025 (Billions) | March 31, 2025 (Billions) | Change (Millions) | Change (%) | | :-------------------------- | :----------------------- | :------------------------ | :---------------- | :--------- | | Total Assets | $17.38 | $17.11 | $263.9 | 1.5% | | Loans Held for Investment, net | $15.60 | $15.36 | $235.9 | 1.5% | | Loans Held for Sale | $0.031 | $0.0058 | $25.2 | 434.5% | | Deposits | $10.34 | $10.40 | ($56.1) | (0.5)% | | Borrowed Funds | $4.88 | $4.59 | $295.7 | 6.4% | - Within loans held for investment, home equity loans and lines of credit increased by $260.9 million to $4.58 billion, while residential core mortgage loans decreased by $25.0 million to $10.97 billion8 - The decrease in deposits was mainly due to decreases in money market, checking, and savings accounts, partially offset by a $20.4 million increase in certificates of deposit9 Financial Condition (YTD Q3 2025 vs. FYE 2024) Comparing to the fiscal year-end 2024, total assets increased, primarily driven by growth in the loan portfolio. Deposits also saw an increase, mainly from retail certificates of deposit, while borrowed funds increased to support loan growth Key Balance Sheet Changes (YTD Q3 2025 vs. FYE 2024) | Metric | June 30, 2025 (Billions) | September 30, 2024 (Billions) | Change (Millions) | Change (%) | | :-------------------------- | :----------------------- | :---------------------------- | :---------------- | :--------- | | Total Assets | $17.38 | $17.09 | $284.9 | 1.7% | | Loans Held for Investment, net | $15.60 | $15.32 | $273.9 | 1.8% | | Deposits | $10.34 | $10.20 | $146.4 | 1.4% | | Borrowed Funds | $4.88 | $4.79 | $90.1 | 1.9% | - Home equity loans and lines of credit increased significantly by $690.8 million to $4.58 billion, while the residential core mortgage loan portfolio decreased by $415.2 million to $10.97 billion18 - Loans originated and acquired during the nine months ended June 30, 2025, included $760.2 million of residential mortgage loans and $1.87 billion of equity loans and lines of credit18 - The increase in deposits was primarily due to a $250.5 million increase in retail certificates of deposit, partially offset by decreases in savings, checking, and money market deposit accounts. Brokered deposits decreased from $1.22 billion to $976.5 million19 Shareholders' Equity and Capital The company's shareholders' equity increased due to net income, while maintaining strong regulatory capital ratios well above 'well capitalized' thresholds, supported by consistent dividends and a dividend waiver from its MHC Shareholders' Equity Activity Total shareholders' equity increased, reflecting net income generation, partially offset by dividends paid and stock repurchases. The company continued its stock repurchase program Shareholders' Equity Activity (YTD Q3 2025) | Metric | June 30, 2025 (Billions) | September 30, 2024 (Billions) | Change (Millions) | Change (%) | | :-------------------------- | :----------------------- | :---------------------------- | :---------------- | :--------- | | Total Shareholders' Equity | $1.89 | $1.86 | $25.4 | 1.4% | | Net Income | $65.0 (YTD) | N/A | N/A | N/A | | Dividends Paid | $44.7 (YTD) | N/A | N/A | N/A | | Stock Repurchases | $0.7 (YTD) | N/A | N/A | N/A | - During the nine months ended June 30, 2025, 57,500 shares of common stock were repurchased at an average cost of $12.87 per share. The company has 5,134,451 shares remaining authorized for repurchase under its eighth stock repurchase program21 Dividends and MHC Waiver The company declared consistent quarterly dividends, and its mutual holding company (MHC) successfully obtained member approval to waive its share of dividends for the upcoming year, pending Federal Reserve non-objection - A quarterly dividend of $0.2825 per share was declared and paid during each of the first three fiscal quarters of 202522 - MHC members approved the waiver of dividends aggregating up to $1.13 per share for the twelve months subsequent to July 8, 2025, continuing a twelve-year trend of approximately 97% approval22 Regulatory Capital Ratios TFS Financial Corporation continues to maintain capital ratios well above the amounts required to be considered 'well capitalized' under the Basel III capital framework Regulatory Capital Ratios (June 30, 2025) | Capital Ratio | Percentage | | :---------------------- | :--------- | | Tier 1 Leverage Ratio | 10.86% | | Common Equity Tier 1 Ratio | 17.75% | | Tier 1 Ratio | 17.75% | | Total Capital Ratio | 18.61% | - All capital ratios exceed the amounts required for the company to be considered 'well capitalized' for regulatory capital purposes23 Company Information This section provides an overview of TFS Financial Corporation's mission, operational footprint, and investor communication plans, including the availability of presentation slides About TFS Financial Corporation Third Federal Savings and Loan Association, founded in 1938, is a leading provider of savings and mortgage products, operating with a mission to help people achieve home ownership and financial security. It serves customers across 27 states and the District of Columbia - Third Federal Savings and Loan Association operates under values of love, trust, respect, a commitment to excellence, and fun, with a mission to help people achieve home ownership and financial security25 - The company lends in 27 states and the District of Columbia, with 21 full-service branches in Northeast Ohio, two lending offices in Central and Southern Ohio, and 16 full-service branches throughout Florida25 - As of June 30, 2025, the Company's total assets were $17.38 billion25 Investor Information The company will make presentation slides available online for investors but will not host a conference call to discuss its operating results - Presentation slides as of June 30, 2025, will be available on thirdfederal.com under the Investor Relations link beginning July 31, 202524 - The company will not be hosting a conference call to discuss its operating results24 Forward-Looking Statements This section provides a cautionary statement regarding forward-looking statements, outlining the types of such statements and the significant risks, assumptions, and uncertainties that could cause actual future results to differ materially from those projected - Forward-looking statements include those regarding goals, intentions, expectations, business plans, growth strategies, trends in credit losses, financial condition, and estimates of risks and future costs/benefits2628 - Significant risks and uncertainties include increased competition, inflation and interest rate changes, general economic conditions, real estate market strength, demand for products, consumer habits, securities market volatility, risk management, funding access, legislative/regulatory changes, accounting policy changes, new market entry, Fannie Mae/Freddie Mac developments, government policy, cyber-attacks, and the impact of pandemics2728 Financial Statements This section presents the company's consolidated financial statements, including the balance sheet, income statements for various periods, and detailed average balances and yields, providing a comprehensive view of its financial performance and position Consolidated Statements of Condition (Balance Sheet) This statement provides a snapshot of the company's financial position at various reporting dates, detailing its assets, liabilities, and shareholders' equity Consolidated Statements of Condition (In thousands) | Item | June 30, 2025 | March 31, 2025 | September 30, 2024 | | :------------------------------------ | :------------ | :------------- | :----------------- | | ASSETS | | | | | Cash and cash equivalents | $452,581 | $463,583 | $463,718 | | Loans, net | $15,595,997 | $15,360,143 | $15,322,059 | | TOTAL ASSETS | $17,375,666 | $17,111,720 | $17,090,785 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | Deposits | $10,341,499 | $10,397,645 | $10,195,079 | | Borrowed funds | $4,882,993 | $4,587,327 | $4,792,847 | | Total liabilities | $15,487,660 | $15,215,063 | $15,228,161 | | Total shareholders' equity | $1,888,006 | $1,896,657 | $1,862,624 | Consolidated Statements of Income (Income Statement) These statements present the company's revenues, expenses, and net income for both quarterly and year-to-date periods, illustrating its profitability trends Quarterly Consolidated Statements of Income Detailed income statement for the three-month periods, showing revenue and expense components contributing to net income Quarterly Consolidated Statements of Income (In thousands) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------- | :------------ | | Total interest and dividend income | $191,407 | $185,952 | $184,906 | | Total interest expense | $116,413 | $113,903 | $115,633 | | NET INTEREST INCOME | $74,994 | $72,049 | $69,273 | | PROVISION (RELEASE) FOR CREDIT LOSSES | $1,500 | $1,500 | ($500) | | Total non-interest income | $7,048 | $7,068 | $6,245 | | Total non-interest expense | $53,185 | $51,088 | $50,788 | | NET INCOME | $21,513 | $21,021 | $19,953 | | Earnings per share - basic and diluted | $0.08 | $0.07 | $0.07 | Nine Months Ended Consolidated Statements of Income Cumulative income statement for the nine-month periods, providing a year-to-date view of financial performance Nine Months Ended Consolidated Statements of Income (In thousands) | Item | June 30, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------ | | Total interest and dividend income | $564,127 | $545,558 | | Total interest expense | $348,756 | $335,815 | | NET INTEREST INCOME | $215,371 | $209,743 | | PROVISION (RELEASE) FOR CREDIT LOSSES | $1,500 | ($2,500) | | Total non-interest income | $20,619 | $18,282 | | Total non-interest expense | $152,214 | $153,263 | | NET INCOME | $64,960 | $61,373 | | Earnings per share - Basic | $0.23 | $0.22 | | Earnings per share - Diluted | $0.23 | $0.22 | Average Balances and Yields These tables provide a detailed breakdown of average balances for interest-earning assets and interest-bearing liabilities, along with their respective yields and costs, offering insights into the company's net interest margin and interest rate sensitivity Quarterly Average Balances and Yields Analysis of average balances and yields for the three-month periods, highlighting key metrics such as interest rate spread and net interest margin Quarterly Average Balances and Yields | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------- | :------------ | | Total interest-earning assets (Avg. Balance) | $16,615,086 | $16,508,486 | $16,554,661 | | Yield on interest-earning assets | 4.61% | 4.51% | 4.47% | | Total interest-bearing liabilities (Avg. Balance) | $14,978,080 | $14,875,775 | $14,850,809 | | Cost of interest-bearing liabilities | 3.11% | 3.06% | 3.11% | | Net interest income | $74,994 | $72,049 | $69,273 | | Interest rate spread | 1.50% | 1.45% | 1.36% | | Net interest margin | 1.81% | 1.75% | 1.67% | | Return on average assets | 0.50% | 0.49% | 0.47% | | Return on average equity | 4.49% | 4.35% | 4.08% | Nine Months Ended Average Balances and Yields Analysis of average balances and yields for the nine-month periods, providing insights into year-to-date trends in interest rate spread and net interest margin Nine Months Ended Average Balances and Yields | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Total interest-earning assets (Avg. Balance) | $16,538,099 | $16,538,130 | | Yield on interest-earning assets | 4.55% | 4.40% | | Total interest-bearing liabilities (Avg. Balance) | $14,894,032 | $14,872,098 | | Cost of interest-bearing liabilities | 3.12% | 3.01% | | Net interest income | $215,371 | $209,743 | | Interest rate spread | 1.43% | 1.39% | | Net interest margin | 1.74% | 1.69% | | Return on average assets | 0.51% | 0.48% | | Return on average equity | 4.51% | 4.22% |